The housing market has seen some fairly big changes during the past year. What was once a red-hot housing market has cooled a bit. Higher interest rates for mortgages coupled with relatively lower supply have made things settle a bit heading into 2023.
But what exactly will the housing market be like in 2023? What kind of housing market trends are we likely to see in the first half of 2023 and beyond? There are some factors involved with being able to predict home sales and affordability, especially at the national level. Let’s talk about what we expect from the housing market 2023.
Interest Rates Tell a Big Part of the Story
Interest rates for mortgages are a main influence on the overall housing market. As inventory has dipped lower over the past few years, interest rates have stayed near historic lows. That all changed in 2022, however.
As inflation and the cost of consumer goods continued to rise at an unsettling rate, steps were taken by the Federal Reserve to curb such high levels of inflation and housing costs. As rates climbed from the lower 2% range up to above 6 to 7%, housing prices started to stall and eventually lowered. While they haven’t been reduced to previous levels in most areas, they’ve still seen some reduction, which is appealing to buyers.
Homeowners Are Staying Put For Now
A factor in the trend of a low supply of housing comes from owners not wanting to make a move. Many homeowners bought at the right time because of extremely low interest rates and lower pricing they were able to negotiate before the spike in home prices. These owners have a very appealing mortgage payment.
Many don’t want to give up their lower monthly payment even if they now have a large amount of equity in their home. Though they’d likely profit in a substantial way from selling their home, most or all of that profit would be put right into a replacement home. The lateral movement to relocate to a better neighborhood or a bigger home isn’t worth giving up the existing affordable home payment they currently have.
New Construction Starts Are Fewer Than They’ve Been in Years
Another aspect keeping home pricing at a higher price range is the lack of inventory. Much of this concerns a lower amount of new construction currently being started. With the price of materials being expensive and interest rates still relatively high compared to recent years, builders are not taking chances with overbuilding.
2023 Is Looking To Be Similar to 2022
The first half of 2023 and beyond may look fairly similar to 2022. Unless interest rates sharply decline or builders start building substantially more new construction, things may seem similar to the previous year. Many sellers are content with staying put and seeing how the housing market changes over time.