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Keep these points in mind if you’ll be continuing your home search.
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If you wanted to buy a home in 2022 but it didn’t work out, you’re no doubt in good company. It’s been a very challenging year for home buyers, and you may have decided at some point to put your house hunting on pause. Or, you may have lost out on enough bidding wars to decide to sit out the housing market until 2023.
But if you’re gearing up to try to purchase a home in the new year, it’s important to know what to expect. Here are some points to keep in mind.
1. Home prices are still high, but gains are slowing
Home prices are still mostly up on a national level. But home price gains are slowing.
What this means is that home prices aren’t continuing to rise from month to month, but rather, are starting to come down. Now this doesn’t mean we’re looking at pre-pandemic home prices. But depending on your specific housing market, it could mean that you won’t have to spend quite as much on a home — or take out quite as high a mortgage loan.
2. Inventory is still very tight
As of the end of October, there were an estimated 1.22 million housing units available for sale, according to the National Association of Realtors. Now that may seem like a decent amount of inventory. But actually, it isn’t. Rather, it’s only the equivalent of a 3.3-month supply of available homes. And it typically takes more like a 4- to 6-month supply to create an even housing market where sellers don’t have a clear upper hand.
Limited inventory is likely to persist in 2023, at least during the first few months of the year. So if you’re buying a home in a market with few listings, you might get stuck in a bidding war or wind up paying more than you’d like. You might also have a difficult time finding a home that has all the features you’re looking for.
3. Mortgage rates are high — and could stay that way for a while
Mortgage rates have risen sharply since the start of 2022. And there’s reason to think they’ll remain high in 2023 — at least during the first half of the year.
A big reason mortgage rates are up is due to recent interest rate hikes on the part of the Federal Reserve. Now the Fed recently pledged to slow down its rate hikes, so that could spell relief for mortgage borrowers at some point in 2023. But those looking to finance a home purchase are unlikely to score a mortgage at a discount any time soon.
Will 2023 be an easier year to buy a home than 2022 was? It’s hard to say. A lot of that will depend on whether inventory picks up, whether mortgage rates go down, and whether a recession strikes (an economic downturn could actually push buyers out of the market, making it easier for remaining buyers to move forward with a home purchase). But if you’re hoping to buy a home in the new year, be sure to keep these factors in mind so you have realistic expectations.
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