2023 Real Estate Market Predictions
New Year, New Market? The 2022 real estate market ended in a very different place than it started. Such a dramatic shift has led many of you to ask, “Are we headed for a market crash like in 2008?” “Is now a horrible time to buy or own a home?” Never fear, we are going to answer your most pressing questions and share our predictions for the 2023 real estate market.
Let’s start with a recap of the 2022 real estate market. We rang in the new year in one of the most competitive markets most have ever seen. A typical day in real estate looked like a home selling well over the asking price with multiple offers within hours of it hitting the market. As a buyer, you needed to see a house the second it hit the market and decide as quickly as possible if you wanted to move forward. No negotiations, no contingencies, and even still possibly being beaten out by a cash offer.
And then in May, the market seemed to just fall off a cliff. Feds began to raise rates quickly and mortgages began to increase. While rates started around 3.2%, we watched them rise to over 7% in just months. With mortgage rates increasing, homes became more expensive to purchase, and fewer homes were going under contract.
In October we saw our peak of interest rates and they leveled out to about 6.5% by the end of the year. And now, here we are in January of 2023, all eagerly awaiting to see what the real estate market will do next.
Our 2023 Predictions:
The market will not collapse like it once did in 2008. In 2008, we saw a residential real estate collapse. Home prices collapsed, there were many foreclosures, and homes sitting on the market for over a year. There was significant job loss and subprime loans were prevalent.
Today’s market looks more like that of 2001 and 2002 when the events of 9/11 caused a stop in the market, followed by a bust, and then it began to improve. The difference between then and now is that we will probably see the market return to normal more slowly than it did back then. But unlike in 2008, we’re in a tight labor market with very low unemployment and subprime loans are virtually non-existent.
This is not another 2008 real estate market collapse. And for that, we are grateful!
Mortgage rates are going to drop! Last year the feds were incredibly aggressive in increasing rates. As they have pulled back from future corrections, interest rates are dropping. Experts suggest that rates will stay at about 6% for the first few months of 2023 and then drop down to about 5% by the end of the year. We predict that more buyer activity and 5-6% interest rates will be the new normal.
We’re seeing a new trend in the 2023 real estate market! Builders are buying down interest rates for their buyers. Some builders are even buying down as low as 4.9%. In other words, new construction is cheap! And builders are continuing to develop areas in North Texas.
Lenders are likely going to ease point charges. In the latter half of 2022, it became more expensive to underwrite a loan. As interest rates skyrocketed, banks anticipated many buyers would refinance their loans when interest rates dropped. Therefore, banks charged more for the loan itself since they predicted that they wouldn’t see the full life of the loan with the higher interest rates. As interest rates level out, we see lenders easing on the point charges to buy down your loan.
There will be more inventory, but not a lot more. Here in North Texas, we still have a strong buyer demand, so inventory is still really limited. On top of that, buyers who were able to get their interest rates at a much lower rate are reluctant to move unless they absolutely have to.
The market will be more balanced. We don’t believe we will see a buyer’s market or a seller’s market. Rather, sellers will need to offer more incentives, do more marketing, and expect their home to be on the market for around 30-60 days. Buyers will be able to negotiate a little more than in previous years and not have to go so far above asking to have a competitive offer.
In conclusion, economists in North Texas predict that 2023 will be a good year in real estate. According to one study, Dallas is predicted to be #3 among the top 10 markets to boom this year. There is demand for those moving to the metroplex, homes are affordable, and there continue to be new homes in developing areas of North Texas.
2023 is going to be a great year. If you want to talk through how these real estate predictions affect your unique situation, give us a call. We are always here to help you make the best decision for buying or selling a home.
Happy New Year!
Until next time,
Brianna and Keelie