McDONOUGH, Georgia - Mortgage rates are finally coming down, with rates in the 5.6% range for a 30-year fixed mortgage not uncommon in early February. Couple that with declining home prices, an increase in home inventory, and it looks like the great American home buyer finally has leverage after two years of home sellers calling the shots.
"2023 will be better for buyers," said Alex Caras, mortgage broker at Magellan Realty LLC. "As the Federal Reserve keeps interest rates at current levels, the buyer's market will begin to open up more, reducing competition for existing homes."
Construction problems caused by supply chain issues are also being alleviated, "so more new homes will be on the market," Caras added.
Buyers gaining an advantage
These are the main reasons why real estate buyers in the USA have an advantage in the busy spring and summer season. Buyers should also have an advantage thanks to these five realities:
1. Mega-high prices are a thing of the past.
"The price escalation we saw in 2020 and 2021 has reached a plateau," said Jennifer Beeston, senior vice president at Guaranteed Rate Mortgage. "It took a good part of 2022 for many sellers to realize that 2021 has passed and they needed to be more realistic with the price and condition of their homes."
In addition, buyers see a return to a more balanced market in 2023. "Now, buyers can actually get inspections and negotiate prices," said Beeston. "That wasn't the case with the drama of 2022."
2. The Federal Reserve is putting the brakes on.
The US Federal Reserve is slowing down its policy of substantial increases in interest rates that prevailed in 2022.
"This means that more buyers will be able to buy a house at a lower price," Caras told TheStreet. "House prices have also been reduced to a more reasonable level, and this will continue for much of 2023 as competition to buy homes has eased."
3. The pandemic is over.
Buyers will have the opportunity to negotiate again in 2023 and even more in 2024.
"We will probably see some distressed sales and sellers will need to become more realistic," said Rena Kliot, founder of Pulse International Realty. "The increase in house prices is not sustainable and is in direct correlation with the pandemic. During the dark days of the pandemic, there was a lot of desperate and emotional buying."
4. Changing tastes in the residential market.
Although single-family homes will continue to be popular, the US condominium market will be back in full swing.
"Life as we knew it seems to be coming back and that's attracting people back to urban living - especially with condos," said Kliot. "Condo prices are also now more affordable or negotiable than single-family homes."
5. Strong signals from the stock market.
In the United States, there seems to be a general sigh of relief that the worst is over.
"Inflation has peaked, interest rates have peaked and home prices have peaked for the time being," said Jared Antin, managing director of Elegran Real Estate. "The stock market - notably the highly technological NASDAQ - has made a significant recovery so far in 2023, which instills a certain level of confidence in the consumer."
The fall in the market for much of 2022 had the opposite effect, reducing consumer appetite for a new home as interest rates and inflation rose.
"Now, a more positive consumer base will help fuel a recovering real estate market," Antin noted.
One of the most important things a prospective home buyer should do now is to remain hopeful and prepared.
"Don't assume that just because you're having trouble finding a house right now, or can't afford a house at today's rates, you'll never be a homeowner," said Jacob Channel, senior economist at LendingTree. "If you have patience and are willing to compromise on some things, like how many bathrooms your house needs to have or what specific neighborhood you need, you can make your dream of homeownership a reality."
In addition, being financially prepared when a good deal comes along is essential at this time.
"Be diligent about saving money and make all your monthly payments on time to protect your credit," Chanel told TheStreet. "Also, research and compare financing offers from different lenders or look into different home loan programs - such as FHA or USDA-backed loans - so you can make the home buying experience more affordable."