McDONOUGH, Georgia – Mortgage rates are finally falling, with rates in the 5.6% range for a 30-year fixed mortgage not uncommon in early February. Couple that with declining home prices, a surge in residential property inventory, and it appears that the big American homebuyer finally has leverage after two years of home sellers calling the shots.
“2023 will be better for buyers,” said Alex Caras, a mortgage broker at Magellan Realty LLC. “As the Federal Reserve keeps interest rates at current levels, the buyer’s market will begin to open up more, reducing competition for existing homes.”
Construction problems caused by supply chain issues are also being alleviated, "so more new homes will be on the market," Caras added.
Buyers gaining an advantage
These are the main reasons why homebuyers in the US have an advantage during the busy spring and summer season. Buyers should also have an advantage thanks to these five realities:
1. Extremely high prices are a thing of the past.
“The price surge we saw in 2020 and 2021 has plateaued,” said Jennifer Beeston, senior vice president of Guaranteed Rate Mortgage. “It took a good part of 2022 for many sellers to realize that 2021 was over and they needed to be more realistic about the price and conditions of their homes.”
Furthermore, buyers see a return to a more balanced market in 2023. “Now, buyers can actually get inspections and negotiate prices,” said Beeston. “That wasn’t the case with the drama of 2022.”
2. The Federal Reserve is putting on the brakes.
The US Federal Reserve is slowing its policy of substantial interest rate hikes that prevailed in 2022.
“This means more buyers will be able to purchase a home at a lower price,” Caras told TheStreet. “House prices have also been reduced to a more reasonable level, and this will continue for much of 2023 as competition to buy homes has decreased.”
3. The pandemic is over.
Buyers will have the opportunity to negotiate again in 2023 and even more in 2024.
“We will likely see some difficult sales and sellers will need to become more realistic,” said Rena Kliot, founder of Pulse International Realty. “The rise in house prices is not sustainable and is directly correlated with the pandemic. During the darkest days of the pandemic, there were many desperate and emotional purchases.”
4. Changing the tastes of the residential market.
Although single-family homes remain popular, the US condominium market is set to return in full force.
“Life as we knew it seems to be returning, and that’s drawing people back to urban living – especially with condos,” said Kliot. “Condo prices are now also more affordable or negotiable than single-family homes.”
5. Strong signals from the stock market.
In the United States, there seems to be a general sigh of relief because the worst is over.
“Inflation has peaked, interest rates have peaked, and house prices have peaked for now,” said Jared Antin, managing director of Elegran Real Estate. “The stock market – notably the highly tech-heavy NASDAQ – has had a significant recovery so far in 2023, which instills a certain level of consumer confidence.”
The market downturn during much of 2022 had the opposite effect, reducing consumer appetite for a new home as interest rates and inflation rose.
"Now, a more positive consumer base will help fuel a recovering housing market," Antin noted.
One of the most important things a prospective home buyer should do right now is to stay hopeful and be prepared.
“Don’t assume that just because you’re having trouble finding a home right now, or can’t afford a home at today’s rates, you’ll never be a homeowner,” said Jacob Channel, senior economist at LendingTree. “If you have patience and are willing to compromise on some things, like how many bathrooms your home needs to have or what specific neighborhood you need, you can make your dream of homeownership a reality.”
Furthermore, being financially prepared when a good business opportunity arises is crucial at this time.
“Be diligent in saving money and making all your monthly payments on time to protect your credit,” Chanel told TheStreet. “Also, research and compare financing offers from different lenders or look into different home loan programs—such as FHA or USDA-backed loans—so you can make the home buying experience more affordable.”