What will the housing market look like in 2023?

Theres been a lot of curiosity around the housing market for 2023. The mortgage rates and inflation has had a huge impact on the real estate market. After the recent pandemic boom with home prices going up by over 40%, the Housing market is finally on its journey to correction as mortgage rates doubled compared to the beginning of the year. 

Here's a few of my Key TakeAways/ facts

• Average sales price in December 2022 dropped by 6% comparing to December 2021. 
• With over 85% of homeowners paying mortgage rates below 5% (and two-thirds with rates under 4%), home sales will remain stagnant as long as rates are elevated. More people will delay moving due to this “‘lock-in effect”’ until rates retreat below 5-6%.  If the rates start to drop to below 6 , we will see some uptick in buyer activity this spring onwards.
• Local markets, which have become increasingly disconnected from local incomes, will be more likely to see price declines of 10% or more, especially if employers are successful at bringing workers back to offices four or more days per week. 
• Depending on the area, renters will also be able to claw back more market power in 2023 as historically high levels of new apartments now under construction are completed. A supply glut for short-term rentals will force some owners in oversaturated markets to convert their listings to long-term rentals, adding more supply for traditional renters.
• Although Inflation is also showing signs of cooling down, it may take until summer or later in the year before the effects are fully felt in the housing market.

Overall, while the housing market in 2023 is facing a number of challenges, there are also reasons to be optimistic. As mortgage rates drop and the economy continues to recover, we may start to see an improvement in the market conditions. It's important to remember that even in the best of times, economic predictions can be uncertain and that specific predictions will depend on how quickly the Federal Reserve can bring down inflation and borrowing costs without letting it affect buyer demand

Source:US News