With interest rates rising and lenders scaling back on loaning money, will purchasing a home in 2023 even be possible? Let’s take a look at the current market predictions for next year to see if it’s something you should pursue.
Mortgage Rate Increases
A huge factor in home affordability is mortgage rates. An article written by Alcynna Lloyd for businessinsider.com states, “The Federal Reserve’s most recent rate hike, which was the third of five promised consecutive hikes, led to a rapid increase in mortgage rates that have helped to push housing affordability to a three-decade low. According to mortgage finance giant Freddie Mac, the average rate on a 30-year fixed-rate mortgage climbed to 6.29% last week. That is more than double the levels seen in 2021 and nearly three percentage points higher than where the benchmark rate stood at the end of last year.”
The increases in mortgage rates means that homeowners will have to reduce the selling price of their homes in order to attract buyers. This will push homes into a more affordable price range for a number of buyers. If you’re feeling down in the dumps about being able to afford a home, don’t give up hope yet!
Another factor that is heavily influencing the market right now is inventory levels. Experts are predicting a 20% reduction in homes for sale in the next year. On its own this wouldn’t normally be ideal for buyers. However, coupled with high interest rates, it works in a buyer’s favor. Because interest rates are so high and inventory is low, the responsibility falls on the seller to make their home as attractive as possible. If not, they run the risk of their home staying on the market for much longer than they want it to. Making their homes more attractive might look like a low listing price, flexibility when negotiating, or an increased number of upgrades. They have to work hard to snag a buyer vs. a buyer having to move quickly in order to secure a home.
The other major factor that will determine the fate of the 2023 real estate market is the economy. If the United States enters into another recession, mortgage rates will likely drop significantly in order to help combat a stale economy. Rates could drop as much as 30 points meaning they would return to around 4%. This is something buyers definitely need to be aware of. Staying on top of lowering mortgage rates will help you beat the rush when it comes to purchasing a new home.
If you’ve been worried you’ll never have enough money to afford a home, don’t despair! 2023 might be the perfect opportunity you’ve been waiting for. Continue to save, pay off debt and improve your credit score so you’re in the best financial position possible when you find a home you love.