2023 Housing Market Predictions: Is Now A Good Time To Buy A House?

For many people, homeownership is the ultimate dream! After all, home isn’t just a roof over your head. It’s a space that’s wholly and uniquely yours. It’s where life’s best moments and fondest memories are made. This is why Pahlisch Homes has been committed to providing a home built with intention since 1983. 

Still, recent fluctuations in the housing market have many people wondering: Is now a good time to buy a house? We’re sharing predictions from our preferred lending partner, Hixon, to educate future home buyers about what to expect in 2023. 

How did the housing market change in 2022? 

Between rising inflation costs, recession fears, and climbing mortgage rates, 2022 was an eventful year for the housing market. Recently, your homeownership dreams may have felt like a moving target. Still, many experts agree that these shifts signal a much-needed rebalancing act. And there are plenty of reasons to believe that the housing market will come out stronger on the other side.

For example, the average home price has remained relatively stable despite rising interest rates. This is especially true in “hot spot” regions like Bend, Oregon, where a growing population helps to sustain home prices. 

And, despite interest rates making some big leaps during 2022, they’re still below the historical average. According to data from Freddie Mac, between April 1971 and December 2022, 30-year fixed-rate mortgages averaged 7.76%. While rates are changing every day, the current rate still sits comfortably below that benchmark. While this may seem like a significant jump compared to January 2021’s all-time low, it’s much more aligned with the historical average. 

Housing market predictions for 2023

So, what do we know about the coming year? And is now a good time to buy a house? We asked the experts at Hixon for insights and predictions about the 2023 housing market. Here’s what they have to say!

Housing inventory is stabilizing

For the last few years, the housing market has been red hot. Low inventory, record-low mortgage rates, and external circumstances like the COVID-19 pandemic resulted in a highly competitive market. For example, in October 2021, when interest rates were at 3.3%, almost every home on the market had multiple offers. As a result, homes in the fastest-selling regions went from listing to closing in as little as four days. That left little time for consideration, and many home buyers rushed into home-buying decisions. 

With the recent interest rate increases, many would-be buyers are hitting the pause button. As a result, houses stay on the market a little longer, and bidding wars have become less heated. In addition, higher interest rates have cooled the market a bit, making it easier for would-be buyers to close on a home they love, not one they’ve rushed into. 

This cooling market is good news for buyers. As Hixon’s VP of Mortgage Lending, Derek Meyers, puts it, “There’s a real opportunity right now for folks! Even with higher rates, today’s lower home prices mean an affordable home is still within reach for many who couldn’t purchase a home last year due to demand.”

The FHFA opened the door to first-time home buyers

In late 2022, the Federal Housing Finance Agency (FHFA) announced the launch of the First-Time Home Buyer Mortgage Rate Discount. This government-sponsored home affordability program was specifically designed to help first-time home buyers. Qualified borrowers can eliminate up to 1.75% in mortgage rate add-ons. Eligibility requirements include: 

• Be a first-time home buyer
• Use the home as a primary/main residence
• Use conventional mortgage financing
• Move-in within 60 days of closing
• Earn a low or moderate household income 

For this program, a low or moderate household income means you earn less than your area’s median household income. It’s true that this particular program won’t benefit everybody. However, it does help level the playing field for first-time home buyers whose rising mortgage interest rates may have made home ownership unattainable. 

Interest rate increases are expected to level out

Mortgage rates more than doubled last year, solidifying 2022’s place in the history books. But drops in late November and early December have economists questioning what we can expect in 2023. Most agree that following last year’s historical leaps, rate increases should level out, likely continuing to rise more slowly until inflation is under control. 

At this point, Derek from Hixon says, a peak seems likely to come earlier in the year and flatten or even trend downward later. One thing experts agree on: there’s no chance interest rates will fall back to their 2021 low of 3%. According to Freddie Mac’s Quarterly Forecast report, mortgage rates are expected to correlate with the historical average in 2023, with an average rate of 6.4% for the 30-year mortgage.

What does this mean for homebuyers? Waiting for interest rates to fall could mean buying a home years or even decades down the line. Even the most optimistic predictions say a sustained drop could push mortgage rates into the 5% range. But that’s not likely to happen until late in the second quarter or even the second half of 2023. And there’s no guarantee that rates will predictably drop. As long as inflation is a factor, trends remain a little unpredictable. So, is now a good time to buy a house? If interest rates are your top concern, now could be the best time for a long time! 

The market is cooling, which can be a good thing for homebuyers

You may have heard that the housing market is “cooling,” but what does that mean? Let’s revisit a staple economic concept, supply, and demand. In a hot market, demand for houses outpaces the supply. In other words, there aren’t enough available homes for everyone who wants to buy one. As a result, there’s more competition for homes for sale, leading to higher prices and faster sales. A hot market favors sellers who can sell their homes quickly and often at a higher price. 

In a cooling market, this favor begins to tip. As demand for houses decreases, the supply can better meet homebuyers’ needs. This leads to less competition, fewer bidding wars, and homes that sell closer to their listing price. 

Again, context is important when talking about a “cooling” market. During these last two years, home purchases outpaced the supply of new homes. Now, the market is stabilizing, which is normal and necessary. And while the market has cooled a bit, many still anticipate rising home prices in 2023. 

So, is now a good time to buy a house?

Ultimately, deciding whether to buy now or to wait is a deeply personal decision. How you answer will depend on your circumstances, financial situation, and reasons for buying a home. There’s one thing we can say for sure: buyers sitting on the sidelines today in anticipation of lower prices tomorrow will likely end up disappointed. If you find a home you love in an area you love, and it also fits your budget, then now’s the perfect time to buy! As Meyer puts it, “Interest rates move up and down based on economic conditions. You can always refinance, but your dream home won’t always be on the market.”

At Pahlisch, we’re committed to helping every future homeowner find an address for each of life’s chapters. Our New Home Specialists can help guide you through the home-buying process, including options that suit your lifestyle and budget. And with passionate home lenders like the team at Hixon Mortgage in your corner, there’s sure to be a personalized mortgage option that works for you. 

Get in touch to learn more about our available homes, the benefits of living in a Pahlisch community, and home financing options!