Will the 2023 Real Estate Market Favor Sellers or Buyers?

Several factors influence whether or not the 2023 real estate market favors sellers or buyers. Interest rates, inventory, inflation, and more impact the real estate market, making it a dynamic industry that is constantly changing. Below we will explore these topics and see if the 2023 real estate market will be best for those wanting to sell or buy a home.

Interest rates have been a hot topic over the past several months as the Federal Reserve has incrementally increased interest rates. It is normal for interest rates to go up and down. According to NerdWallet, a 30-year fixed-rate mortgage in January 2023 had a rate of 6.29%. In February, the average increased to 6.63%, with another increase in March to 6.76%. Forbes states the average APR went up in April 2023 to 6.97% on a 30-year fixed mortgage.

 

Keep in mind that just last year, interest rates for people with a good credit score hovered around 3%, so the current rates this year are higher than people have seen over the last few years.

 

You may be wondering why the Federal Reserve is increasing interest rates. The role of the Federal Reserve is to keep the United States of America's economy clipping along at a steady pace – not too quickly and not too slowly, but just right.

 

If it looks like the economy may hit an obstacle, the government ensures it does not go off course. By increasing interest rates, the government can keep the economy from moving too quickly and allow for steady economic growth throughout the country. If the Federal Reserve raises interest rates, it can start to reign in inflation and stabilize the prices of goods and services.

 

While the government does not dictate the mortgage rates, how it manages the benchmark interest rate does affect mortgage rates. Their actions have a ripple effect throughout the economy, especially when looking at Edgewater Chicago homes for sale.

 

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So what does this mean for buyers and sellers in the real estate market? While there are still some concerning issues out there – such as interest rates, recession fears, inflation, and more – there are also some positive trends.

 

The National Association of REALTORS® reported a decline in median existing home sales by 0.2% from February 2022 to February 2023 to $363,000. For 131 straight months, the year-over-year numbers have continued to increase until now. Declining sales for the last 12 months finally increased to 14.5% from January 2023 to February 2023. However, sales are still lower than they have been. According to the National Association of REALTORS®, home sales are down 22.6% compared to last year.

 

Recently, mortgage rates have been sliding to 6.27% as of April 13, 2023. Some buyers who have been eyeing Wilmette houses for sale but have yet to purchase a home may be motivated to start looking for a home now that the rates are declining. Some experts are still determining a recovery of the housing market. Even though more homes are selling and the price of homes is slowing down, they remain cautious.

The stubbornly low housing inventory has been and continues to be one of the most significant challenges in the real estate industry. During the Great Recession and the housing crash in 2008, the country saw the construction of new homes decline dramatically, and we still have not fully recovered, even 15 years later!

 

Sadly, this trend will continue throughout 2023 and beyond. Because the supply of homes is so low and demand has remained steady, home prices continue to increase, reflecting the fundamentals of supply and demand. When the supply is high, and the demand is low, prices decline. When the supply is low, and the demand is high, prices increase.

 

There is no end to the inventory situation when looking at Evanston real estate. Multiple offers are still occurring on numerous properties. Experts do not see the inventory condition improving anytime soon.

 

The problem remains exacerbated by the fact that approximately 70% of homeowners in the United States of America have a 4% or lower mortgage rate. Unless there is an absolute necessity to move, homeowners with these low rates are not interested in moving and giving up their low mortgage rates. Unfortunately, this could make it difficult for first-time buyers to find and afford a home.

Forbes declares, after five straight months of declining construction on single-family homes, the number of home starts rose 9.8% in February 2023. Additionally, there was an increase of 13.8% between January 2023 and February 2023 in building permit applications.

 

However, builders expect positive conditions in the future. Forbes, the organization that analyzes builder sentiment – known as the Wells Fargo Housing Market Index/National Association of Home Builders – saw an increase from 42 to 44 points. However, the index identifies 50 points or more as builders seeing positive conditions, so we still have a ways to go as far as identifying improvements in inventory for new home construction.

 

The increases in central bank interest rates also affect new construction. The costs companies incur to borrow money increase when interest rates rise. Therefore, creating new housing becomes more expensive when it costs more to increase production and secure financing, thanks to raising interest rates.

While prices slowly decline, the Illinois neighborhoods you want to move to may still be too expensive. If this is the case, try to remain flexible. If you can move to a less expensive area that still offers you the luxury amenities you desire, go for it. Those that work from home or have a flexible work schedule may be able to find the perfect house for them in a less expensive city while enjoying all of the amenities they crave.

In today's ultra-competitive market, it's crucial to work with an agent who knows the area you are looking to sell in and can work to list your home at the perfect price point to attract buyers and negotiate on your behalf to get the most profit out of your home as possible. Be sure to heed any advice your Real Estate Agent gives you, such as decluttering, thoroughly cleaning your home inside and out, and organizing or removing some possessions to show your home to its best advantage.

 

When buying or selling a property, contact Mary Summerville of Summerville Partners for all your real estate needs. Their attention to detail, expert negotiation skills, and exceptional market knowledge ensure all their clients experience a successful real estate transaction.

_{*Header photo courtesy of Summerville Partners}

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