Home prices are driven by supply and demand. In 2020, housing inventory was low and demand surged as mortgage rates fell below 3%. The new demand, coupled with the shortage in supply, caused home prices to soar. But now that rates are climbing higher, the market is cooling off.
If you’re planning on buying your first house in 2023, you may be wondering what to expect. Will home prices stay the same or will they eventually come down? Here’s what you need to know.
Will Home Prices Fall in 2023?
Right now, most experts are saying that home prices are very likely to come down in 2023. However, there’s some debate as to how much they’re expected to drop.
Some experts are saying that there will be a decrease of about 5.5%. They believe that prices will come down, but not to the extreme amounts that we’ve seen in the past. The housing market is unlikely to crash due to the shortage of available homes.
Other experts believe that the price fall will be more significant. They’re expecting a drop of up to 20%.
That means if mortgage rates come down, 2023 could be a very good year for buying your first house.
Factors Affecting Home Prices in 2023
How much home prices fall will ultimately depend on several factors. Interest rates, housing supply, and the state of the U.S. economy will play an important role.
- Mortgage rates: High mortgage rates have caused many prospective buyers to put their plans on hold. The decrease in demand could cause home prices to plummet. However, if rates come down and people start buying again, the drop may not be as significant.
- Housing inventory: Right now, there’s a major shortage in the number of available homes for sale. However, some experts think that the housing inventory will increase slightly in the coming year. This could cause prices to come down.
- U.S. economy: The state of the economy will also affect home prices in 2023. Inflation has been driving home prices upward. However, experts are saying that a recession is likely to occur. Decreased buying activity could cause home prices to fall further. On the other hand, if the recession is brief and homebuying can resume fairly quickly, there may be little to no impact on home prices.
Have Questions? We’re Here to Help!
Buying your first house can feel intimidating. If you have questions about the process or would like some advice, please do not hesitate to reach out. One of our experts will be happy to assist you.