{"id":3856,"date":"2023-01-10T15:00:00","date_gmt":"2023-01-10T15:00:00","guid":{"rendered":"https:\/\/preprod.realtrends.com\/blog\/2023\/01\/10\/3-variables-that-will-influence-2023s-housing-market\/"},"modified":"2025-03-13T02:48:40","modified_gmt":"2025-03-13T02:48:40","slug":"3-variables-that-will-influence-2023s-housing-market","status":"publish","type":"post","link":"https:\/\/preprod.realtrends.com\/blog\/2023\/01\/10\/3-variables-that-will-influence-2023s-housing-market\/","title":{"rendered":"3 variables that will influence 2023’s housing market"},"content":{"rendered":"\n

Picture this \u2013 you\u2019re at a wedding, the crowd has taken to the dance floor and suddenly, Whitesnake takes over the speakers and a mass exodus commences. No offense to David Coverdale but no one is getting down to Whitesnake. <\/p>\n\n\n\n

Just as you start to make eyes with the buffet, the sound of Nelly permeates the room, and you take a quick inventory to determine who will be the first to bring the dance floor back to life. <\/p>\n\n\n\n

Now, you\u2019re at a crossroads. Are you going to resuscitate this shindig or wait until the crowd surge forces you toward the outskirts of the dance circle while the best man does the worm? <\/p>\n\n\n\n

That\u2019s a critical moment, not much unlike the moment that today\u2019s property buyers and sellers are facing as we embark upon the housing market in the new year<\/a>. <\/p>\n\n\n\n

Will they continue to quietly peruse listings, hoping that the price on that perfect property starts cozying up to their budget? Will they sit idly while those with stronger stomachs continue to optimize the seller\u2019s need to sell? Will sellers assume that they\u2019ve missed their window of opportunity and pull back? Or, will they take advantage of the lull, trusting that the right conditions will prevail? <\/p>\n\n\n\n

It\u2019s not always easy to break from that herd mentality. This is the part of the year when most buyers and sellers have decided to venture back to their seats and wait for the spring housing market to gain traction. Come April, buyers and sellers alike will emerge from hibernation, flood the market and immerse themselves in negotiations and bidding wars. The players that will emerge victorious are the ones who mobilize now and leverage heightened home appreciation rates, shrinking inventory, normalizing interest rates, and discounted listing prices to their advantage.\u00a0<\/p>\n\n\n\n

Let\u2019s break it down.<\/p>\n\n\n\n

It\u2019s easy to fall victim to \u201cexpert\u201d housing market opinions and predictions made by sources around the industry. I\u2019m not here to add to the confusion, but I am here to shine a light on the facts and variables that are most likely to influence what we see in 2023:<\/p>\n\n\n\n

Steadying interest rates<\/strong><\/h2>\n\n\n\n

The Federal Reserve<\/strong> commissioner has pledged to slow down interest rate increases<\/a> in 2023. <\/p>\n\n\n\n

The Realtor.com<\/strong> forecast tells us that by the end of the year, interest rates will settle at around 7.1%, as compared to today\u2019s rates which average 7.4%. <\/p>\n\n\n\n

While you might be cringing over the number sitting at the front of that decimal point, think about the hike we saw in 2022. We kicked off the year at an average of 5.5% and rang in 2023 at 7.5%. The slowing of rate hikes will create space for more lucrative deals while making the market more accessible to more buyers who may not have otherwise qualified. <\/p>\n\n\n\n

That said, back to our dance floor analogy, the change in tune will eventually reach the buyers who had ruled out the possibility of securing a loan in 2022 and 2021. Once lenders effectively spill those beans, the market will be oversaturated, and this window will close, likely long before spring.<\/p>\n\n\n\n

In other words, we\u2019ll experience a cool down but not for long.<\/p>\n\n\n\n

Motivated sellers<\/strong> in this housing market<\/h2>\n\n\n\n

Now, there is something to be said about the evergreen variables that motivate sellers to list their properties. Job changes, retirement, relationships, affordability \u2014 whatever the case, forces at play will influence a seller\u2019s decision to sell regardless of market conditions. <\/p>\n\n\n\n

Couple those variables with the aftermath of the pandemic, a moment in time when people were selling and buying high, and you\u2019re left with a substantial group of folks who purchased homes in 2020-2022 who can not afford to maintain payments. That or the limited inventory forced them into a home that was less than optimal. They moved on the deal anticipating a similar return, but the economy had other plans. <\/p>\n\n\n\n

What does this mean for those buyers turned potential sellers? <\/p>\n\n\n\n

It means that now \u2014 a time when interest rates are expected to normalize and demand remains strong \u2014 is an ideal time to pull the trigger. While the market may not be saturated by overly motivated buyers at the top of the year, that crowded dance floor come spring could be detrimental to those who really need to close a deal now.<\/p>\n\n\n\n

Sellers? Do not be defeated by what I just said. The days of multiple offers and bidding wars are not over. The buyers you see actively looking now are going to keep looking until they find the right property with the right conditions attached to it. We\u2019re also going to continue seeing an influx in home prices as inflation continues to steer investment decisions. Both can work in your favor when a listing is ideally positioned \u2013 now is not the time to take your foot off the gas.<\/p>\n\n\n\n

A leveraging of the buydown mortgage<\/strong><\/h2>\n\n\n\n

A buydown mortgage<\/a> essentially enables today\u2019s buyers to play the long game, affordably but they also enable creativity among sellers. Just as it sounds, the loan allows purchasers to temporarily lower the interest rate upfront:<\/p>\n\n\n\n