As a constantly evolving sector, the housing market has been influenced by technological, social, and economic factors. Thus, both property sellers and buyers need to stay up-to-date with the latest trends likely to affect their transactions in 2023.
While interest rates keep fluctuating with more buyers considering getting more properties, experts predict a slowdown due to home affordability.
This guide explores the real estate trends 2022 and predicted 2023 trends to enable property sellers and buyers to make informed decisions while setting them apart from competitors. Read on for the latest real estate trends investors and real estate agents should know.
Housing Market Trends for 2022
The following were housing trends for 2022:
Higher Mortgage Rate
The aggressive hikes on the Federal Reserve benchmark rate and 40-year high inflation have added pressure on mortgage rates, which have dramatically doubled since 2021.
According to Freddie Mac, the average interest rate for 2021 was 2.98%. Sadly, on Nov 10, the housing market’s 30-year fixed-rate mortgage ended, leading to a rate increase.
This rate increase and high home prices have sidelined many buyers and dampened housing affordability. For instance, a 30-year fixed-rate mortgage for a $300,000 loan will cost $1,283 monthly at a 3.11% rate last year.
At a 6.33% average rate, that loan will cost an additional $580 monthly or $6,960 yearly. In June 2022, housing affordability was at a 33-year low, according to National Association of Realtors (NAR) data. Hopefully, a mortgage rate stabilization and increment in inventory might stop the rate hike.
According to NAR data, the housing affordability issue has reduced first-time home buyers’ rates to the lowest level since last year as millennials and Gen Z face a long path to homeownership.
Housing Market Slowdown
At the beginning of last year, expert real estate predictions for 2022 included a home-buying frenzy, with home buyers purchasing houses above the listing price. As the year progressed, rising mortgage rates and inflation dampened housing demand.
Experts’ housing market predictions showed home sales would be 16% lower than in 2021, the lowest since 2014. However, projections showed annual new home sales decreased by 17% for 2022, a return to the pre-pandemic levels.
While home sales fell, housing market prices remained constant. After increasing by 9.8% in 2022 and January 2023, housing prices will likely not change this year. However, in places like San Francisco, where home purchase activities have been reduced, most will continue to witness a slight decline in home prices.
One housing trend in 2022 that will persist till 2023 is higher mortgage interest rates, with home sales sagging under persistent housing inventory and declining home prices. As escalating home prices and mortgage rates reduce the number of buyers, sellers should learn to readjust their expectations.
One of the housing market 2022 predictions that might occur in 2023 is high appreciation. Homeowners enjoyed high appreciation levels last year. According to ATTOM Data Solutions, even as house prices start easing from the end of 2022, more than half of mortgage holders were “equity rich.”
Being equity rich means the homeowners have an estimated loan balance of less than 50% of the property’s estimated market value. During the 2022 second quarter, homeowners’ annual home equity gain was nearly $60,000, unlike in 2021.
Hopefully, positive equity increments might soften in 2023. Pandemic property buyers who bought their homes during the competitive housing markets might also not witness significantly less appreciation.
According to a study from Redfin, if home values fell by four percent by 2023 end, only the mortgages of 3.4% of owners who purchased properties in the last two years would be affected. Before a purchased pandemic property’s value reduces, percentages must drop by double digits.
Equity motivated property sellers the previous year, making them anticipate bidding wars for listed properties. Experts predict more homeowners using their second-lien products as the market keeps rising.
The Growing Housing Bubble Fear
The effect of the Great Recession, when home values decreased, and foreclosures increased, might haunt many buyers. However, housing experts insist the current market is different.
As the real estate forecast for 2022 includes growing fear of a repeat performance of the 2008 housing crash, real estate investors should be reassured that the housing market crash won’t happen this year despite the volatility.
One 2022 real estate forecast that will become more popular in 2023 is the remodeling boom. Despite the slow housing market, most homeowners are still considering renovating.
The property’s accumulated high appreciation might explain the home improvement boom. According to a survey by Houzz, 22% of property owners say the return on investment (ROI) is the leading remodeling motivation.
The National Association of Realtors 2022 Remodeling Impact Report provides insights on remodeling tasks costs and potential paybacks. As more people consider upgrading their property instead of moving, homeowners look for guidance on home resale value.
Housing Market Predictions for 2023
Since we discussed the top real estate market forecast for 2022, it’s time to explore expert predictions for 2023. The following are some real estate trends to know in 2023:
1. Buyer’s Market
While the real estate market predictions for 2022 showed a seller’s market, experts are predicting a move to a buyer’s market.
However, due to the slow home price growth, some regions might experience a seller’s market in 2023. Still, the national housing market forecast shows it might become a buyer’s market before the year runs out.
Buyers will welcome the development after years of fierce bidding wars, sight-unseen offers, and few concessions in a fast-moving market. Most industry experts predict buyers will have more leverage this year, enjoy more negotiating power and request reduced closing costs or repairs.
However, low inventory could affect the buyer’s market, and sellers still have significant negotiation leverage.
2. Housing Inventory Might Improve
Due to labor and material shortages resulting from the pandemic, an increasing population, and the growth of institutional investors, there’s now a shortage of housing supply. While inventory has increased earlier in the year, available homes are still insufficient to meet demand.
One of the real estate projections for 2022 showed post-pandemic rebounds from June, helping inventory stay relatively stable for the rest of the year. However, real estate professionals expect a significant inventory increase for existing homes because most buyers and would-be sellers are currently abandoning the national housing market.
According to the Mortgage Bankers Association, over 85% of homeowners with mortgages are locked in a sub-5% interest rates due to the higher interest rates from the Federal Reserve. Therefore, many homeowners might prefer staying in their primary residence for much longer than rushing to sell.
Also, labor delays and Covid-related materials have stalled many construction projects, with home builders starting to withdraw from undertaking new construction projects. While there might be less competition this year in the housing market, inventory may remain tight.
House price predictions for 2022 and rising interest rates might lead to more foreclosures this year (the average home price has increased recently as other Covid-related foreclosure projections and foreclosure moratoriums expired by the end of 2021), impacting inventory.
As more property owners default in 2023, inventories might keep increasing. Homes might sit on the market longer than average, leading to an increasing housing inventory.
3. Lower Home Prices Before the Year Ends
Home prices have increased since the early pandemic days. However, higher interest rates and home prices have affected the member of buyers, forcing sellers to accept low prices.
In a competitive market where mortgage rates declined, more buyers, especially millennials, will want to purchase properties. Rising mortgage rates mean fewer buyers will compete for a property.
With some people choosing to stay for a more extended period in their current homes or abandoning the property search due to higher prices, home prices might start declining throughout 2023.
According to the data on median home prices, experts predict that home prices might fall between 5%-10% in 2023. This change may be connected to winter’s slow season and the rising interest rates in early spring. While the high home prices are reportedly expected to plummet gradually in the next few months, there’s still uncertainty surrounding the predicted fall.
Most experts hope the prices normalize in the year’s first six months. However, the year’s second half is still unclear, and the housing sector will depend on inflation and mortgage rates.
Real Estate Market Trends That Will Be Outdated in 2023
Some of the top house market predictions in 2022 that will be outdated in 2023 are:
20% Down Payment
Longstanding home buying trends, such as putting down 20% on your property, might phase out in 2023 due to the many available financing options most buyers are exploring presently. Also, with home prices climbing, it’s often hard to get 20% in cash for buying a home.
2022 real estate predictions showed high average interest rates, leading to fewer home sales. Presently, most mortgage lenders record low mortgage rates but higher housing costs, further reducing the number of interested buyers.
Personalized Offer Letters
During seller’s markets in hot real estate markets, many would-be buyers wrote personalized letters to distinguish themselves from other interested buyers so the sellers could accept their offers. However, since many agents advise against the practice for many reasons, it might be outdated by 2024.
Can Historically Low-Interest Rates Affect the 2023 Housing Market?
One real estate outlook in 2022 that buyers still face this year is fluctuating interest rates. Low-interest rates encourage more people to invest or buy more properties, leading to potentially higher home prices and increased demand.
While it might benefit sellers, buyers might find it challenging to find affordable properties.
Will the Housing Market Witness a Slowdown in 2023?
Experts predict a housing crash this year due to affordability concerns. This slowdown could lead to lower home prices, more housing inventory, and fewer buyers.
Will Technology Greatly Impact the 2023 Housing Market?
Technology is changing how agents market and sell properties, with artificial intelligence and virtual reality providing opportunities for sellers and buyers to connect.
Technological innovations will help streamline the real estate transaction process, making it accessible to more individuals. Predictions for houses in 2022 included the significant impact of technology, and the trend has persisted to this year.
The 2023 housing market presents challenges and opportunities for both sellers and buyers. Hence, understanding the latest real estate trends, including affordability issues and low-interest rates, can help property sellers and buyers navigate the housing market successfully.
With some of the housing market predictions focusing on potential market slowdowns and affordability concerns, it’s pertinent to adapt to changing times while staying informed. Before the year ends, it’s best to closely monitor the real estate landscape to help you make informed and confident decisions when selling or buying properties.
By leveraging technology and following the latest 2023 housing trends, sellers and buyers can position themselves for real estate success.
The success of every property buyer or seller rests on hiring a knowledgeable agent and their knowledge of the housing market. If you’re looking to purchase a property in Massachusetts, Boston, or any other part of the country, Homes by Ardor offers the best multifamily and single-family homes for sale.
Go through our property listings to find your dream house, and contact us today. Our experienced and knowledgeable brokers can help you find properties matching your budget and preferences.
In her 25-year career, Steph Wilkinson has been involved in the acquisition, marketing and sales of over $3 Billion dollars of residential real estate. A number of years ago, Steph transitioned into Brokerage Leadership for National real estate brands and tech start-ups. She has served as a Business Strategist for real estate agents and brokerages alike and is also a real estate coach and trainer. In her new role with the Iconic Team, Steph will be responsible for the growth of the team and will be working with all of our agents to increase their productivity and bottom line.
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