2023 Housing Market Trends

Whether you're looking to buy or sell, you need to know what's happening in the housing market this year. After the last couple of years, it may feel like there will always be a better time to make that big move. Well, it's time to start stockpiling boxes — 2023 might be your year.

At the end of 2022, home purchases increased for three consecutive months, which could signal the positive shift we've all been waiting for. While economists have mixed views on the housing market this year, they agree there are some trends to keep your eye on. Let's take a look at the 2023 housing market trends so that we can build some financial confidence for the coming year.

1. Increased Activity This Spring

Housing markets often see increased activity in the spring. This year, though, real estate agents have reported an early surge in the spring market. Homebuilders also speak of an increase in demand. If you're selling, you may see more interest in springtime. Some realtors have even noted the return of bidding wars in early 2023.

Mortgage rates have trended lower over the last few months, making homes more affordable to buyers. Home accessibility increases the demand for houses and brings buyers into the market, which makes the market more competitive.

2. More New Construction

In October 2022, new home construction was up 42% from pre-pandemic rates. You can expect more new homes on the market than existing ones soon. The higher number of newly available homes is driving construction prices down, which could overflow into the existing home market.

Builders will want to sell as soon as possible. They may choose to encourage buyers with lower prices and mortgage rates for new construction. Many owners are also looking at construction with rentals in mind, especially in the case of multi-family units.

3. Falling Mortgage Rates

Mortgage rates are already down in early 2023. Although there's no guarantee about whether they'll hold for the rest of the year, economists remain hopeful.

Some economists predict that the inflation rate will slow down in the latter half of 2023, which gives mortgage rates a chance of stabilizing below 6%. Since there's a chance of falling mortgage rates, getting into the homebuying market in 2023 may be fruitful.

4. Greater Demand in the Midwest

The Midwest has avoided significant home price increases compared to the rest of the U.S. Lower prices mean smaller down payments, which can mean lower mortgage payments even if the rate rises again.

Home buyers are likely to look for homes in areas like Iowa, Ohio, Illinois and Kansas. These states are an excellent choice for first-time home buyers, as mortgage-to-income ratios are below the national average.

Many Midwest metros, such as St. Louis, Missouri, have good housing inventories since sellers are more comfortable putting their homes on the market here. If you're a first-time home buyer, keep the Midwest in mind.

Selling Your House

If you live in the right area and it's time to sell your house this year, remember the following:

• Find the best agent: A successful sale depends on getting the right people on your team. Take your time researching the best agent for you — look for one who knows your area well and has excellent reviews from other sellers.
• Set realistic expectations: Remember, 2023 is a new year with new prices. Ensure your expectations align with market trends to connect with buyers and get your sale.
• Make small changes: Get your house ready to sell by making small changes. You can clean and declutter to make the rooms look bigger, make the house smell pleasant and even hire a professional photographer. Be wary of making significant changes and renovations in the current market. Your home's market value must reflect your upgrades to ensure you get your money back.

Buying a House

Are you planning on buying a home? Keep the following tips in mind:

• Set your budget: Decide on your budget in advance and stick to your chosen number. Mortgage rates are still close to 7%, and you want complete financial confidence when buying a home.
• Understand your market: Monitoring your local market is vital when buying a home. Are there new developments on the horizon? They could mean more competition if you want a brand new house or less if you're looking for an established neighborhood. Knowing what's happening in your area gives you an idea of how long you can take to consider your decision.
• Be patient: Homes are on the market for a median of 75 days, so stay calm and wait for the perfect home to come on the market. Rather than rushing into a purchase, take the time to think it over.