Last year, one factor drove the real estate market more than any other - rising mortgage rates. In an effort to put the brakes on inflation, the Federal Reserve began a series of interest rate hikes in March 2022. While some sectors have been slow to respond, the housing market has reacted accordingly with a tapering off of both demand and price.
HOW ABOUT MORTGAGE RATES IN 2023?
In our local Maryland market, we still have a very low inventory of homes for sale with buyer demand exceeding the available homes. This means it is still a seller's market, and multiple offers on a property are still common. Currently, local lenders are advertising rates under 6%, but will they go up later in the year?
- Realtor.com forecasts rates to rise to 7.1% by the end of this year
- The Mortgage Bankers Association projects the 30-year fixed rate to decline steadily to around 5.2% by the fourth quarter
- Fannie Mae economist predicted rates to be around 6% by the fourth quarter in a recent press release
What does this mean for you?
Even the experts can't say for certain where mortgage rates are headed. Instead of trying to "time the market," focus instead on buying or selling a home when the time is right for you. There are a variety of mortgage options available that can make a home purchase more affordable, including adjustable rates, points and buy downs - and keep in mind you can always refinance down the road. We'd be happy to offer you a trusted mortgage advisor who can outline your best options.
HOW ABOUT SALES VOLUME AND INVENTORY?
The home-buying frenzy in the past few years is likely behind us. While the desire to own a home remains strong, higher mortgage rates have made it unaffordable for a large segment of would-be buyers. This, coupled with an already low inventory, will result in fewer home sales - a reduction of 7% to 20% this year (rising by 23% to 15% in 2024). The level of inventory (homes for sale) is also predicted to fall 15% short of the 2019 average - lower supply leads to higher demand.
What does this mean for you?
As a buyer, you will likely have a little more time to make a decision and some more negotiating power as inventory levels increase this Spring. If you're hoping to sell, the continued low inventory in our region may work to your favor even with the specter of increasing interest rates, particularly if your home presents beautifully and is priced correctly.
HOME PRICES ARE PREDICTED TO REMAIN STABLE
While some economists expect home prices to fall this year, many expect them to remain fairly stable. Many economist agree that a housing market crash like the one we experienced in 2008 is highly unlikely. The factors that caused prices to surge at that time (lax lending standards and a surplus of inventory) aren't prevalent in our current market. National Association of Realtors Chief Economist, Lawrence Yun expects the average median home price to tick up by 1% nationwide, and Fannie Mae economists expect a 1.5% rise. Some markets will experience greater appreciation and others may have greater declines.
What does this mean for you?
It can feel scary to buy a home when there's uncertainty in the market. However, real estate is a long-term investment that has been shown to appreciate over time. Our local market is still supporting the increase in sales prices we've seen since 2019 because our inventory is still low, however, it's a "slower" more balanced market now which takes some of the pressure off both buyers and sellers. Call us now for a complimentary Buyer or Seller Strategy session.
RENT PRICES WILL CONTINUE TO CLIMB
The buyers who have pulled away from purchasing a home will increase demand for rental properties, which also are experiencing low inventory. Economists have predicted rents to increase anywhere from 3% to 6.3% with a return to low pre-pandemic rental prices unlikely.
What does this mean for you?
If you're currently renting, consider speaking with a mortgage professional who can get you started on a path to homeownership. You can lock in a set mortgage payment and build long-term wealth by putting your money toward your equity instead of your landlord's. If you've ever thought about purchasing an investment rental property, now may be the perfect time! Call us now to get started.
WE'RE HERE TO GUIDE YOU
While national real estate forecasts can provide a "big picture" outlook, real estate is local. As local market experts, The Deane Team can guide you through the ins and outs of our market and the issues most likely to impact sales and drive home values in your particular neighborhood.
Sources:
Realtor.com 2023 Bold Predictions
Realtor.com National Housing Forecast 2023
National Association of Realtors
CNBC - How Much Higher Rent Will Go in 2023
Posted by Teri Deane on
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