is 2023 a good time to buy a home.=

You may be wondering, is 2023 a Good Time to Buy a Home? If you have been paying attention to the housing market for the past few years, you will know that it’s been a wild ride. Many families hoped to buy a home during 2020 and 2021 to take advantage of the extremely low rates caused by government stimulus to boost up the economy.

The feds loosened the money supply in hopes of keeping the economy afloat after the COVID shutdowns. This caused high demand for housing, vehicles and other goods. The result of this flow of money into the economy lead to record high inflation.

The same factors that caused a real estate boom in 2020-2022 are now having the opposite affect on the housing market. As the feds try to bring down inflation and reduce the money supply, housing has started to turn downward.

Will we have another housing crash like 2008?

No, this isn’t like the housing bust of 2008, but it’s still gonna be a rough ride and take time to recover in the short term. Many experts agree that home sales and prices are expected to continue to struggle in 2023.

Sales hit a record 6.65 million annual rate in January 2021, but by November 2022, sales had dropped to a 4.09 million annual rate, a decline of 38.5%. The sudden drop is in line with the Fed’s sharp rate increases.

From May 2020 to June 2022, both the national Case-Shiller price index and the FHFA price index increased by more than 40%. Since June 2022, Case-Shiller is down 2.4% and the FHFA is down 1.1%. The biggest drops have been in cities on the West Coast, like San Francisco, Seattle, Phoenix, San Diego, and Las Vegas. But every major city has seen a decline in the past few months.

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Prices are expected to continue to fall as the recovery continues. They got a little too high compared to rents and need to drop more to better reflect rental values. Industry experts are expecting a total decline of 5-10% from peak to bottom, which is nowhere near the 25% drop we saw during the 2008 housing crisis.

Why wont house prices fall as much as 2008?

Why not as bad this time? Well, for one thing, home prices are already pretty close to fair value when you consider construction costs. Plus, there’s not a massive excess of homes on the market like there was before. And most importantly, the majority of homeowners with mortgages have super low fixed rates, so they’re not likely to want to sell anytime soon which is keeping the supply of homes low.

New home sales are also down significantly since the COVID peak, but they should hit a bottom sooner. The main difference is that new homes are being sold by contractors, not homeowners. Plus, there’s been a shortage of new homes in the past decade, so we need more of them. The average price of a new home may fall, but we’ll probably see more of them being built.

Is 2023 a good time to buy a home?

Home buyers are facing two major problems: higher mortgage rates and higher home prices. With a 20% down payment, the increase in mortgage rates and home prices since December 2021 translates to a 52% increase in monthly payments on a new 30-year mortgage for the median existing home.

It is tough to convince someone with a low fixed-rate mortgage to sell when they could be stuck with a higher rate if they buy a new home. So sellers are likely to ask for more money, while buyers want to pay less. This isn’t going to change anytime soon, so expect existing home sales to be even slower in 2023 than they were last year.

If you are a homebuyer, the good news is that the multiple offers and overbidding on homes is finally calming down. Buyers that want to invest in owning a home for the long term no longer face as much competition from investors, families buying vacation homes, and other homeowners that are looking to upgrade their homes.

2023 will be a Buyer’s Market for Housing?

For the past few years, homebuyer flocked to homes for the opportunity to get low rates and payments but they had slim chances of winning bids. Buyer had to accept unfavorable terms such as drastically overpaying, waiving critical inspections and agreeing to whatever sellers demanded. These days have come to and end and we have flipped over to a buyer’s market for housing.

Buyers are now seeing other financing terms such as FHA loans, USDA loans and VA loans being accepted by sellers. Some are also able to ask for seller paid closing costs making the cash out of pocket much lower. In many cases buyers are even able to offer less than asking price and win bids.

2023 Housing Market Outlook

It’s important to remember that these last few years were anything but normal. COVID led to a ton of government stimulus to fight the pandemic and the resulting shutdowns. The government pumped money into the economy to boost it up which made home prices (and everything else) skyrocket out of control. The Fed’s job is to fight inflation which is exactly what they are doing. It is their plan to keep home prices in the line of affordability.

Once the feds see a few quarters of leveling out, they will turn course and bring mortgage rates back down giving homebuyers the opportunity to refinance into lower rates. Housing prices will have a faster recovery than we saw after the Great Recession in 2008 and those fighting to win bids on homes will soon be back. By the end of 2023 or early in 2024 we will be back to a more normalized housing market.

Ready to Buy a Home in 2023?

If you missed out on the chance to buy for the past few years due to seller’s unreasonable demands, 2023 may be the opportunity you have been waiting for. Yes, mortgage rates are up and you will start with higher payments than you would have however rent prices also continue to increase and refinancing to lower rates in the future is always a possibility.

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