How Will the Real Estate Market Perform in 2023?
The start of a new year is always exciting for real estate professionals and homeowners alike. As we look forward to what 2023 has in store for the market, it's essential to consider the current state of affairs and what experts predict for the coming year. With mortgage rates rising, home sales slowing, and uncertainty reigning supreme, many are nervous about the future. So what is the 2023 real estate forecast? We've consulted North Carolina's finest Realtors®, and with their help, we analyzed relevant data, and here's what we've gathered about real estate market trends we can expect in 2023.
Real estate forecast for 2023
With mortgage rates on the rise, home sales slowing, and uncertainty permeating the market, homeowners, sellers, and buyers alike feel uneasy. The average 30-year fixed mortgage rate currently stands at 6.63%, while the inflation rate is a staggering 7.1%. Furthermore, the National Association of Realtors reports that existing homes are selling at the slowest pace observed in 10 years.
So if you're planning to embark on a real estate adventure this year, you must research. That is especially important if you are moving out of state. After all, if you are, let's say, in for an interstate moving from Florida to North Carolina, the easiest thing will be hiring movers. However, the same as you'll need to let experts give a hand when it comes to your move, you'll also need expert help to understand the 2023 real estate forecast.
To gain insight into the future, we reached out to several industry experts for their forecasts and projections. Their evaluations and predictions cover a range of topics, and in this article, we'll focus on the following:
● Mortgage rates forecast for 2023
● Home sales forecast for 2023
● Real estate market trends forecast for 2023
Mortgage rates forecast for 2023
If you plan on buying a North Carolina home in 2023, one of your biggest concerns is the escalating cost of financing a home. Interest rates roughly doubled in 2022, and mortgage rates have followed suit. Will the trend continue in 2023? Experts are divided on the issue.
On the one side, experts predict that 30-year and 15-year mortgage rates will continue to rise throughout 2023, reaching an average of 8.75% and 8.25%, respectively. They cite continued inflation, higher overall interest rates, a potential recession, and geopolitical tensions as the main drivers of this trend.
The other group of experts is, on the other hand, much more optimistic. They believe rates will peak at about 8% and 7.25% for 30-year and 15-year loans in early 2023. Then, it will gradually decrease to around 6.0% and 5.25% over the year. They advise this entirely depends on Federal Reserve’s ability to get inflation under control and ease up on its aggressive rate increases.
Potential scenarios for mortgage rates
Experts from the National Association of Realtors envision three different rate scenarios occurring in 2023:
- Inflation remains high, and the Federal Reserve continues to raise interest rates, causing mortgage rates to climb to around 8.5%.
- Inflation slows, and mortgage rates stabilize near 7% to 7.5 % for 2023.
- The Federal Reserve raises rates to curb inflation, but the economy falls into a recession, causing rates to drop to 5 percent.
Home sales forecast for 2023
While the direction of mortgage rates will majorly impact home sales, the effect on home prices is less clear. Experts predict a mixed bag, with prices rising in some areas and falling in others. For instance, some experts believe that home prices will rise in areas with strong economic growth but fall in areas with weaker growth, while others see prices remaining relatively stable, with only a slight decline in some areas.
All experts agree that the current uncertainty and volatility in the market will make it challenging to predict home prices with any certainty. Factors such as the overall state of the economy, the direction of mortgage rates, and the level of housing supply will all play a role in determining the trajectory of home prices in 2023.
Potential scenarios for mortgage rates
Regardless of which scenario plays out, it's clear that the direction of mortgage rates will majorly impact home sales. Here are three potential scenarios and how it could all go down:
- With rising mortgage rates, sales will be the most affected, with a significant decline in activity.
- Sales will be more stable, but still slower than in previous years.
- With falling rates, sales may pick up, but the overall economic conditions would likely be unfavorable, impacting the overall market.
Real estate forecast on market trends for 2023
A shortage of homes has been a major factor driving the real estate market in recent years. But experts have different predictions for housing inventory in 2023. Some real estate experts believe that inventory will remain low. They point out that current homeowners are unlikely to trade in their low-interest mortgages for new homes with higher interest rates. On top of that, builders have scaled back on housing starts in recent months. That means there will not be a significant increase in supply from new construction.
On the other hand, some experts predict that housing inventory will increase throughout 2023 as homes become less affordable due to high mortgage rates. They believe that as the rates increase and make it more difficult for people to afford the homes, more sellers will put their homes on the market. But that doesn't mean there aren't ways to have a successful sale in case you're planning on selling your North Carolina home.
Potential scenarios for home prices
Experts argue on whether homes will be more or less affordable in 2023. Some believe that high mortgage rates and steady home prices will cancel each other out, and overall affordability will not change dramatically. Some of them agree that overall home affordability won't change much in 2023, while others think that as home prices will not fall proportionally with the increase in interest rates, homes may even seem less affordable.
The Bottom Line
As per the 2023 real estate forecast, it's clear that the real estate market will be marked by uncertainty and volatility. However, one thing is for sure, 2023 will be a challenging year for the real estate market, but it will also be an exciting time for those willing to navigate these specific circumstances.
So whether you're planning to sell or buy your North Carolina home, the key to success in this market will be to stay informed, be flexible, and be ready to take advantage of opportunities. Most importantly, you should reach out to experienced North Carolina Realtors® who'll guide you and ensure you successfully end your real estate adventure.