The US housing market is facing numerous challenges in 2023, including rising interest rates, economic uncertainties, and declining home prices. Despite these challenges, there are some positive indicators such as the increase in new home sales and the slowing down of rent growth in some areas.
It is essential to keep in mind that the US housing market is like a supertanker and takes a long time to change course or speed. Therefore, it is challenging to make precise predictions about the future of the housing market.
The US housing market trends in 2023 are a mixed bag of challenges and opportunities. While the rising interest rates and economic uncertainties pose significant threats, some positive indicators provide a glimmer of hope. Ultimately, only time will tell how the housing market will fare in the coming months and years.
As interest rates continue to rise, the U.S. housing market is facing challenges that are likely to lead to a recession during the first half of 2023. This article will explore the current state of the housing market, including rising mortgage rates, climbing home prices, and economic uncertainties. We will also discuss the impact of these trends on buyers and sellers, as well as predictions for the future.
Impact of Rising Mortgage Rates and Climbing Home Prices
One thing is clear — higher mortgage rates combined with rapidly rising housing prices from the pandemic have slowed housing activity considerably. The U.S. housing market just lost the most value since 2008, and U.S. existing home sales dropped to a more than 12-year low in January. However, the pace of decline slowed, raising cautious optimism that the housing market slump could be close to reaching a bottom.
Furthermore, rising mortgage rates over the past year have steered many would-be buyers out of the market, leading to softer demand and declining home prices. This has resulted in a stand-off between buyers and sellers, with the former unprepared to commit until prices fall, and the latter unwilling to drop their prices. However, buyers are in a better position now than a year ago when the buying frenzy resulted in bidding wars. They are more likely to win concessions from sellers, such as breaks on list price, credits for repairs, help lowering mortgage costs, etc.
Impact on Buyers and Sellers
The housing market’s “relative high note” in January and February is likely to “prove temporary,” according to experts. Buyers and sellers are in a stand-off, with the former unprepared to commit until prices fall, and the latter unwilling to drop their prices. This is because there is a complete shift in mindsets. Many millennials and Gen Z don’t want to purchase houses. Plus, the increase in cost relative to salaries also creates an issue in the housing market.
Predictions for the Future
The housing market is like a supertanker – it takes a long time to change course or speed. However, there is cautious optimism that the market will improve in the second half of the year. Some U.S. banks are trimming their exposure to home lending after mortgage activity collapsed under the pressure of Federal Reserve rate hikes. Nevertheless, the U.S. overall mortgage delinquency rate remained low in December 2022, though 65 metro areas saw annual upticks.
Mortgage interest rates in the U.S. have jumped to their highest level since November 2022. Mortgage buyer Freddie Mac reported on February 21, 2023, that the average on the benchmark 30-year rate rose to 6.5% from 6.32% last week. The average rate a year ago was 3.89%. However, over 90% of U.S. homeowners either own their homes outright or have fixed rate mortgages under 5%.
Rentals in the U.S. Housing Market
Rent prices may have surged in the past few years, but there are still big metropolitan areas in the U.S. where renters can find an affordable home. Rent growth slowed again in January for the 12th month in a row, and the median asking rent in the 50 largest U.S. cities is down to $1,726. That’s a $7 drop from December and $80 less than August’s peak. However, rents for up to two-bedroom properties were still up 2.9% from last January and 20.6% (or $295 more) from January 2020, per Realtor.com.