The pandemic has caused a lot of changes in the housing market, and over the past few years we’ve seen sub-three percent mortgage rates, fast-paced bidding wars, and record-low inventory. However, more recently we’ve seen a correction in the market, with higher mortgage rates, slower sales activity, and dampened price pressure.
It’s important to note that the national median home price rose by more than 40% over the past three years, but in some local markets, especially here in California, prices increased even faster due to low mortgage rates and pandemic-fueled demand to work from home, among other things. However, mortgage rates have recently set a record for the fastest increase in more than 40 years, and although they have started to trend down, they are expected to continue falling in 2023, but at a slower rate than the previous increase.
This change in mortgage rates, as well as low inventory, is expected to lead to a decline of about 6% in home sales nationally in 2023, the lowest level in nine years. It’s important to note that a decline in the number of home sales is not the same as a decline in home value. In fact, the national median home price is expected to be relatively flat in 2023 due to low inventory and rebounding demand. However, local markets may see differing trends, with more affordable markets experiencing stronger price growth.
Overall, it will be a challenging environment for both buyers and sellers in 2023, but opportunities for both will exist. Buyers in more affordable markets, as well as strong earners, may have a bit more leverage, but it will still be a competitive market. Sellers in high-demand markets with low inventory may have an advantage, but it’s important for both buyers and sellers to be prepared and have their financing and offer strategy in place, which is why we offer both free preapprovals, and free consultations.
It’s also important to remember that the frenzied pace of home sales activity during the pandemic was not typical or sustainable, and a healthy, stable housing market requires balance. By understanding local market conditions and the state of the housing market as a whole, both buyers and sellers can navigate the current market and make informed decisions.
Source: https://www.housingwire.com/articles/the-red-hot-housing-market/ (paywall)