Everything You Need to Know About Buying a House in 2023
After the pandemic, the real estate industry saw many good and bad changes. However, the high demand for real estate has remained the same, despite the changing mortgage rates and excessive home values.
Now that 2023 is upon us, many wonder what real estate will do in the New Year. Will prices stay high, and what about interest rates? No one has a crystal ball, but here’s what’s predicted so far for the 2023 homebuying trends. Demand will likely change, and interest rates are still up, but that doesn’t mean buying a house in 2023 is impossible.
Here’s what you might expect if you plan on buying a house in 2023.
Mortgage Rates May Plateau or Slightly Decrease
Mortgage rates were the center of attention in the media this year. With record highs, many buyers stepped back from their dreams of buying a house as they reeled from the shock of interest rates increasing by 4 – 5%.
According to Fannie Mae, interest rates are expected to fall to an average of 6.6% in the first quarter of 2023 and down to 6.2% in the year’s final quarter. While there’s no guarantee this will happen, if it does, it may open more doors for buyers who are on the fence about buying a home.
Home Prices will Likely Fall
It’s probably no surprise that home prices will likely fall in 2023. With the drastic hikes in 2021 and 2022 before mortgage rates skyrocketed, everyone knew the prices had to fall eventually. What goes up must come down, right?
Experts are all over the place with their predictions on what might happen to home prices. Fannie Mae predicts home prices will fall 1.5% in 2023, but other economists have a bleaker outlook.
Everyone agrees, though, home prices will likely fall, which may offset the mortgage rate increase, making homes more affordable for more buyers in 2023.
Demand May Slow Down
If you purchased a home during the pandemic, you probably remember the crazy high demand. There were buyers everywhere, competing for homes and bidding prices much higher than their values. Sometimes home sold in as little as a few hours.
Experts don’t believe we’ll see much of that in 2023. This doesn’t mean the demand will go away altogether, but there will be a decrease.
What this means for buyers is they are in the driver’s seat. Before, it was a seller’s market because there were more buyers than sellers, so sellers could be picky about the offer they chose.
When the demand slows, buyers have control because there will likely be fewer buyers than sellers. This means sellers may have to bend somewhat on what they expect to make on a home or the terms they’ll accept.
In short, sellers can’t be as picky if they want to sell their homes in a buyer’s market.
Supply may Remain Low Too
There’s another problem, though. Supply may come up short. With 85% of homeowners holding onto an interest rate much lower than today’s rates, there’s not a lot of incentive for people to sell their homes today.
Of course, you’ll have people that move for reasons they can’t control, such as job relocations, moving closer to family, or needing to downsize.
But you won’t have people moving just because they want a different house, want to try something different or even want to upgrade. With interest rates still high, many sellers will hold onto what they have until they can be sure about what the future holds.
Buyers Must be Diligent
What does all this mean for buyers in 2023?
In short, you must be diligent. You may not have as much competition as there was in 2021 and 2022, but fewer houses may also be available. If you’re planning to buy a house in 2023, the key is to prepare yourself financially, know what you want, and work with a reputable real estate agent to find the perfect house.
We aren’t in a recession yet, and mortgage requirements haven’t changed much, but the more you prepare for mortgage financing, the easier it will be to close on your dream home.
Here are some steps buyers can take:
- Save for a large down payment – The more money you put down on your home, the lower your payment will be. Also, lenders tend to give lower interest rates to borrowers with more ‘skin in the game.’ So if you’re a first-time buyer, save as much as possible for the down payment, and if you currently own a home, use as much of your capital gains for the down payment.
- Get pre-approved – Don’t assume you’ll get mortgage financing; make sure of it. Get pre-approved before looking at houses. With higher interest rates, some borrowers can borrow less than they thought. Know what you can borrow and ensure you qualify before looking at homes.
- Work with a great real estate agent – Don’t try to navigate the real estate market yourself. It might be tempting, but you won’t have access to the best properties or the best deals. Instead, work with an agent that understands Houston real estate in 2023. It’s a different landscape than before and requires different tactics.
Final Thoughts about Buying a House in 2023
With the New Year upon us, everyone is hopeful that the real estate industry will have a more stable and profitable year, but as a buyer, the best thing you can do is be prepared for anything.
Save money to keep your mortgage balance down, ensure you have excellent credit, and stabilize your employment, so you look as attractive as possible to lenders.
With your pre-approval in hand, you’re ready to navigate Houston real estate in 2023. While it can change at any time, the 2023 homebuying trends point to a lucrative year for buyers, giving you more options, even if you have a slightly higher mortgage payment than anticipated.