With inflation and everything else happening across the country, you might be curious about how this affects real estate. For example, is it a good time to buy? Is investing still a good option?
In 2022, after record-breaking home prices across the country, skyrocketing interest rates put some pressure on the housing market. Since December, however, mortgage rates have been steadily declining until now. Despite this, many economists have looked at the data and are still unsure if real estate prices will slow down or drop throughout 2023.
Here are the top five 2023 real estate trends you should be watching for.
Trend #1: Real Estate Inventory Is Low but Growing
Low inventory has been a problem in the real estate market for some time.
For a while, and especially during the Covid-19 pandemic era in 2020, there wasn’t enough inventory to satisfy buyer demand. However, the trend is beginning to change. Since May 2022, inventory has been moving upwards. And in November, according to real estate market data, this was the year’s largest month-over-month jump.
Even though this is great news, inventory is still not where it was pre-pandemic. So, what does low real estate inventory mean for buyers? First, buyers must be vigilant when going house hunting, as the best properties will be gone quickly due to a lower-than-normal inventory.
Here are some tips to help you find the perfect home in this tight market:
- Give Up Certain Wants
If you can’t find the perfect house, be willing to give up some things you want. For example, look for the must-haves and worry less about the nice-to-haves. Consider a home within or below your budget; you can always upgrade over time.
- Extend Your Search Radius
Is your ideal community too competitive? Although it might not be your first pick to look beyond your desired neighborhood, the hidden gems that can be found outside your search radius might surprise you. In this situation, working with an experienced agent or someone with access to numerous properties would be good. That way, they can help you find the best place for you.
- Get Pre-Approved As Soon As Possible
It’s essential that you get pre-approved for a mortgage prior to going house hunting. It’s even more crucial when there is a low supply of homes. Failing to take this extra step at the beginning of your search could allow a buyer to take your future home without you knowing it.
Trend #2: Home Values Are Still Rising
The fact that home prices continue to rise year-over-year is not surprising.
Of course, they fluctuate slightly month-to-month, which is a typical seasonal trend for prices. However, prices are expected to stay the same because there is still a strong buyer demand and a limited supply of homes for sale. Thus, right now might be a great time for sellers to make a substantial profit.
To get the best possible offer for your home, be patient and wait for the right deal. Some buyers might offer you a low price; however, wait for the offer that’ll amount to the highest profit.
As for buyers, it might seem pointless to purchase in this current market. Actually, it might even be terrifying. Although these fears are valid, being afraid will get you nowhere. Because the truth is, there will never be a perfect time to purchase. The best time is always now because you don’t want to miss your opportunity.
If you are going to purchase in this current market, you must know what price range you can afford. It would be best if you committed to sticking to your budget no matter what. Don’t let yourself be tempted to buy beyond your means.
Trend #3: Mortgage Interest Rates Are Higher
The Federal Reserve raised interest rates in 2022. This resulted in the average rate of a 15-year fixed-rate mortgage jumping from 2.8% in January to 6.36% in October. Simultaneously, the average rate for a 30-year fixed-rate mortgage reached 7.08% that same month.
That’s why 15-year mortgages are usually recommended. They have lower rates than 30-year loans, so you’ll pay less interest.
Unfortunately, high interest rates will mean that fewer people are likely to be interested in purchasing. Your house or property may be on the market for a little longer now. Thus, be patient as you wait for offers.
Photo by Vojtech Okenka
Trend #4: Growth Of Online Real Estate Services
Listing homes and properties online have become the norm these days.
Many companies and realtors have resorted to posting online because of ease and convenience real estate investor software. Several platforms, services, and data are readily available for people to use.
- Using a “Virtual” Agent
Many hybrid services now allow you to handle things online and reduce traditional agent commissions. The main benefit is that you get some of the same services as if you were working with an agent but at a fraction of the cost.
- Third-Party Buyers
Nowadays, it’s very common for third-party buyers to do all the work for you.
They will purchase your home or property from you while simultaneously handling things like inspections, repairs, and home showings. These companies promise less hassle and charge the same commission as agents for selling costs.
- Mobile or Online Closings
Digital technology makes it possible to manage virtual documents that are necessary for selling and buying.
Many real estate transactions now use remote online notarization and electronic signature software to speed up the process. This means that you can buy or sell without ever leaving your home.
These types of digital services are expected to continue to be available in real estate in 2023.
Trend #5: More Access To Risky Buying Options
There are other trendy and “creative” ways to purchase a home. Although these ways aren’t always recommended, you can consider them.
- Rent-To-Own
This deal requires you to rent the house for a time, ranging from several months to many years, before becoming the owner.
Rent-to-own has the advantage of being able to move quickly into a place without having to save a down payment. Additionally, you don’t need to be qualified for a mortgage immediately.
However, rent-to-own has one downside: it increases renting costs because some of your monthly payments will be used to purchase a home. Also, if you decide not to purchase the house—or something else happens, like you are denied a mortgage—you will not get any extra payments back.
Therefore, there are a lot of risks involved in this situation.
- Down Payment Loans
A down payment loan is another risky real estate trend.
This is when you avoid taking out a personal loan, which is the same as purchasing a home with zero down. Essentially, the entire house is borrowed, but you borrow it from two companies with two different interest rates.
Buying a house without a down payment is not a smart idea. You should have a down payment of at least 5% to 20% of your home’s value. Failing to do so will mean you will have to pay more interest and fees.
Photo by RODNAE Productions
Is Right Now A Good Time To Invest?
Regardless of the market data, real estate is valuable no matter what.
It’s always a great time to invest if you want to earn some extra income. However, that doesn’t mean you won’t have to put in some effort. Real estate ownership can be costly and time-consuming. So, before investing in real estate, stay up to date with the 2023 trends and understand all the details.
