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Looking Ahead at the Housing Market in 2023
Where will rates go?
Even though we are now halfway through 2023, the number one concern still, for most people who are interested in buying a home in 2023, is what is going to happen to mortgage rates. Rates have gone up in relation to the Federal Reserve’s federal funds rate, which has risen from near zero at the beginning of 2022 to around 4.25% by the end of the year. The Fed is expected to keep increasing its rate in order to get inflation under control, but at a slower pace in the first part of 2023. The median sale price of a home in Somerset County was $551K last month, (June ’23) is up 5.4% since last year. The median sale price per square foot in Somerset County is $315, up 7.5% since last year.
Somerset County Housing Market Trends
What is the housing market like in Somerset County today?
In June 2023, Somerset County home prices were up 5.4% compared to last year, selling for a median price of $551K. On average, homes in Somerset County sell after 17 days on the market compared to 16 days last year. There were 368 homes sold in June this year, down from 520 last year.
Expert predictions on rates
Many of the most respected industry watchers are predicting that rates will continue to come down in the second half of 2023. The Mortgage Bankers Association (MBA) and the National Association of Realtors® (NAR) both are forecasting that mortgage rates come down throughout the year, and finish 2023 in the mid-5% range. Fannie Mae and Freddie Mac take less optimistic views, seeing rates hovering in the high-6% range and finishing the year near 6.2%-6.5%.
However, high home prices along with high rates have priced many would-be homebuyers out of the market. And that’s been bad news for sellers lately, as there are fewer buyers and therefore lower demand. So, a drop in home prices, along with a drop in mortgage rates, would be great news for everyone.
Home price forecast
Real estate website Redfin is also predicting good news for homebuyers. Their forecast is for the first year-over-year decline in the last decade, with an average home price at $368,000. So while home prices aren’t dropping to where they were pre-pandemic by most of these forecasts, they are likely staying near where they ended 2022 as we move ahead to 2023.
Looking ahead at housing affordability
More than the mortgage rate or the price of the home, most homebuyers start with this question: Can I afford it? Housing affordability refers to the amount of a homeowner’s monthly budget their home payments represent. Over the last twelve months, this has gotten worse and worse, making it extremely hard for first-time homebuyers to purchase a home.
If mortgage rates come down, and home prices are at a lower average than last year, that means that housing affordability will come down. Hopefully, in 2023 more people will be able to answer yes to that question.
Trends to keep an eye on
With those major factors accounted for, what will that mean for the rest of the housing market? Here are some more housing market predictions:
Hot months for homes
In most years, spring and summer are the most popular times to buy a home, but the pandemic threw that trend out the window. With rates so low in 2020 and 2021, along with the increased flexibility most people had due to work-from-home and online school, we saw demand spike throughout the year.
Now that rates have increased, many families have settled back into their pre-pandemic work and school routines. we will see a return to seasonality, with a focus on home sales in spring and summer when people are more inclined to move.
From bonkers to a buyer’s market
One of the most memorable parts of the housing market over the last few years was how much of a seller’s market it became. Houses would sell in less than 24 hours after listing, above asking price, with inspections waived. That’s how desperate buyers were to close on a home with the low rates we were seeing then.
But thankfully that’s in the past. We’ve seen demand dip as rates have gone up in the past year, and that should continue. Danielle Hale, chief economist for Realtor.com, wrote in her housing forecast, "There will be more homes for sale, homes will likely take longer to sell, and buyers will not face the extreme competition that was commonplace over the past few years."
It is my commitment to help make the process of getting a home easier for you that I am optimistic about the year ahead. When you work with me, you will know that you will have an expert on your side to help you realize your dream of homeownership with FACTS, no matter what happens in the market in 2023.
Need expert advice and up-to-the-minute data about the markets? Ask me. I will guide you to the right experts that will give you the reliable information needed to make the right decisions.
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