The current market makes it a pretty poor time for most people to buy a house. But if you already have stable finances that are guaranteed for the next year or so, or if you’re in an exceptionally strong local housing market, then you might just be ready to be a homeowner.
There’s a reason 80% of respondents to Fannie Mae’s Home Purchase Sentiment Index believe now is a bad time to buy: the median home price (roughly $370,100) is still higher than most people can afford, and six interest rate hikes from the Federal Reserve resulting in the largest single-year rate increase since the 1980s.
Deciding whether it’s a good time to buy a house is a deeply personal choice. Below, we’ll look at some market trends happening right now and help you decide for yourself if now is a good time to buy a house.
Check out last year’s insights
- Should I Sell My House Now or Wait Until 2023? How to Decide
- 20 Things to Know When Buying a Home in 2022
- Millennial Home Buyer Report: 2022 Edition
Is 2023 a good time to buy a house? 3 trends and what they mean for buyers
Trend 1: Mortgage rates are up
Higher mortgage rates will make homeownership more expensive and likely detract would-be buyers from entering the market.
Already, a high base rate for conventional mortgages has pushed homeownership out of reach for around 15 million Americans, according to Freddie Mac. While it’s impossible to predict how high the Federal Reserve will push rates, experts don’t think it’ll get any better in 2023.
What buyers can do
Be sure you can afford a higher mortgage rate. You might have to buy less home or put a higher down payment if the monthly mortgage is more than you can afford.
Get a mortgage pre-approval now. Getting a mortgage pre-approval now means you can lock in to today’s rates before the Federal Reserve raises them again.
Plan on refinancing. Even if you get a higher mortgage rate now, you can still refinance into a lower one later. Just keep your credit score and income the same (or higher) to qualify.
Questions to ask before you buy
- How much home can you afford to buy?
- Are you pre-approved for a mortgage?
- Have you saved enough for the down payment and closing costs?
- Are you ready to settle down?
- How’s your credit score?
- Do you (and anyone you live with) have job security?
- How does your level of debt compare with your household income?
Trend 2: Home prices are still increasing, but more slowly
In September 2022, the median home price declined 0.52%, continuing a three-month streak of prices shifting downward. The National Association of Realtors (NAR) saw the same trend: the median home price is now $342,941 compared with the record-high $413,800 price tag in June.
Year over year, homes are appreciating at a slower pace — a good sign for buyers who’ve been priced out of the market. Although this median price is higher than $355,700 last October, the price increase from October 2021 to 2022 (6.6%) is now less than the increase from 2020 to 2021 (13.1%).
What buyers can do
Don’t be afraid to negotiate. Even though it’s still a seller’s market, buyers should feel increasingly more empowered, especially with this research on hand. Competition isn’t as fierce, and you shouldn’t feel timid to negotiate a lower price.
Avoid homes with inflated prices. Wait for price cuts on homes that are still selling below the median price. And if you’re skeptical about a home’s price, run a comparative market analysis (CMA) for yourself. Or better yet: ask your real estate agent to do it.
Trend 3: Available homes remain low, but buyer demand isn’t as strong
Home supply continues to be an issue for home buyers. Two major factors influencing home supply right now include:
- Reluctant sellers. Around 42% of homeowners feel now is a bad time to sell, according to Fannie Mae’s Sentiment Index. That’s a major increase from 33% in September 2022.
- Fewer homes being built. With higher borrowing rates and fewer buyers in the market, construction companies are scaling back. In October, home starts were down 4.2%, with single-family homes taking the largest cut (6.1% decline).
That said, buyer demand also shows signs of cooling off. For one, homes are staying on the market longer, according to the NAR, and they’re receiving fewer offers. In September 2022, sellers averaged only 2.5 offers for their homes, just over half the number they got in April (5.5 offers).
What buyers can do
Take your time and do your research. Even though supplies are low, you should still inspect the property, analyze the price, and feel confident it’s the right home for you.
Consider off-market listings. With fewer choices on the MLS, you might want to consider distressed or vacant properties, foreclosures, short sales, or auctioned homes.
Bottom line: Don’t rush into your home purchase!
Even though supply is low, you should still take the time to inspect the property and analyze the price so that you feel confident it’s the right home for you.
- You can lock in your mortgage rate now, and refinance later.
- You have negotiating power.
- You don’t have to settle for an inflated home price.