2022 was a bad year for homebuyers; here's how you could do better if buying a house in 2023
We've witnessed high, stagnant prices for close to two years and recently survived an unprecedented mortgage spike. Here's a look at what the next 12 months might bring.
STATEN ISLAND, N.Y. -- If you shopped for a home in 2022, you might still be scarred by the process. Considered a literal real estate roller coaster, this past year included a hodge-podge of housing events, marked by an unprecedented mortgage rate spike, high, stagnant prices and historically low inventory.
But, according to real estate experts, the next 12 months could mark a turning point for both buyers and sellers.'There will be some things for buyers to look forward to in 2023,' Danielle Hale, chief economist for Realtor.com, recently wrote in her 2023 housing forecast. 'There will be more homes for sale, homes will likely take longer to sell, and buyers will not face the extreme competition that was commonplace over the past few years.'Hale said the real estate slowdown that began as mortgage rates surged in 2022 is still expected to continue into the new year. But she noted that buyers will probably soon start to enjoy advantages such as a growing number of homes for sale.
She also observed that the 2023 housing market could become a 'nobody's-market' -- not friendly to buyers nor to sellers.'Consumers who are ready for the challenge will need up-to-date information on market conditions, creativity and flexibility to adjust, and a healthy dose of patience in order to create success,' she notes.So how should you approach this year's homebuying process?Nerdwallet.com, a website focusing on personal finance, suggests seeking deals on newly constructed homes because builders are likely to reduce prices or offer incentives.'Builders faced growing numbers of cancellations in 2022 as mortgage rates rose dramatically while houses were under construction,' the site notes. 'Buyers signed purchase contracts when rates were low, but rates had risen past the point of affordability by the time the homes were completed.'And it's probably a good idea to wait for a decline in mortgage rates too. Nerdwallet reports that Fannie Mae, Freddie Mac and the National Association of Realtors all forecast a gradual decline in mortgage rates in 2023, with the 30-year mortgage averaging between 6.1% and 6.5% in the fourth quarter.
The Mortgage Bankers Association forecasts a more abrupt decline, with the 30-year mortgage averaging 5.2% in the fourth quarter of 2023, the site says.But buyers should regard these predictions with a little skepticism.'These forecasters were way off the mark a year ago, when they predicted that the 30-year mortgage would average from 5% to 5.3% in the fourth quarter of 2022,' Nerdwallet notes. 'They didn't foresee how aggressively the Fed would raise interest rates and the accompanying rise in mortgage rates.'And while there is no clear trend yet on prices – which vary substantially from state to state – some experts are predicting a 15% to 20% drop from the spring 2022 peak.According to Nerdwallet, Rick Palacios Jr., director of research for John Burns Real Estate Consulting recently noted in a podcast interview that the median existing home price rose about 40% from spring 2020 to spring 2022. So, in his opinion, a drop of 20% wouldn't be surprising after such a swift run-up in prices.'We squeezed a decade of home price appreciation into two years,' Palacios said on the Altos Research 'Top of Mind' podcast, indicating that a significant drop is overdue.