The 2022 market was one for the books. We saw some positive all-time highs in 2022, such as home values, and some other highs that aren’t so positive (like interest rates).
We also saw record lows. Record low interest rates and record low days on market were the new normal in the early months of this year. Once rates shot up, we also saw incredibly low numbers of new mortgage applications.
The housing market this year started off incredibly hot, benefiting from record high competition and record low interest rates. In the first quarter, bidding wars and over-asking price offers were completely expected, and lots of buyers had an aggravating time looking for houses when all of their offers were turned down.
Sellers had the obvious advantage early on this year. Nearly every homeowner was (and most still are) sitting on a nice little pile of equity in their home. Since the tables have turned, however, it’s still not all that certain that buyers now have the upper-hand.
While the drop in competition certainly gave buyers more power, to the point where many would go ahead and consider this a buyers market, the reason is because interest rates have become so expensive that many buyers are priced out of the market- so there is far less competition. So yes, while buyers will have an easier time getting a lower offer approved and negotiating for repairs, those come at a price, and that price is the interest rate they get.
Plus, despite buyers having more power to negotiate and houses taking longer to sell, home prices really haven’t dropped all too much. Inventory is still too tight for prices to start really coming down.
Buyers and Sellers are stuck
In November, the National Association of Realtors noted that home sales dropped again for the 10th month in a row. It’s the longest streak of decreasing sales since the NAR started tracking sales back in the late 90’s. The numbers for December aren’t being released until mid January, but it’s reasonable to expect this month to be the 11th.
Buyers are hesitant to buy while prices are only slightly down from their peaks a few months ago, and sellers are reluctant to sell since most managed to lock in a great rate while they were at all-time lows, they aren’t in a rush to get a new home with a new interest rate.
What about 2023?
Nobody can predict the future, but just about anybody and their mother has their own opinion on what 2023 will hold.
Many economists expect the economy to get worse in 2023 before it gets better, but others say that won’t apply to the housing market.
Many optimistic experts predict for interest rates to cool down as the Feds get a grasp on inflation. Spring, which is usually when the housing market starts warming back up anyways, should bring a breath of fresh air to the housing market, according to most housing experts.