As 2022 drew to a close, the U.S. housing market remained a challenge. Home prices were still high, though down from their record highs in June. Mortgage rates were twice what they were 12 months earlier.
So how is someone who hopes to buy a house expected to navigate 2023? Will conditions improve or are consumers better off continuing to rent?
No one has a crystal ball but real estate professionals spend a lot of time studying market trends and looking at history. If anyone has insight into that question they probably do.
Shmuel Shayowitz, president and chief lending officer at Approved Funding, thinks anyone contemplating a home purchase this year needs to access personalized guidance and advice.
“There is no question that the housing market is transitioning away from a seller's market, but it is not the housing market crash that the media has many believing it is,” Shayowitz told ConsumerAffairs. “Some areas are still seeing strong home prices with limited inventory causing unique market conditions that differ from the national headline stats.”
In that case, home prices may stay elevated, or even go up slightly, providing no increase in affordability.
Consider financial goals
Eddie Martini, strategic real estate adviser at HouseCashin, a company connecting sellers with investors, says it all depends on someone’s financial goals.
“If homeownership is a goal you have been working towards and you have saved the needed down payment and are able to qualify for a purchase amount that will provide you the home and the location you desire without causing extreme financial stress and anxiety then buying would make more sense than continuing to rent,” he said.
But if you have other financial goals – such as getting out of debt and rent in your market is still affordable, it may pay to keep renting. After all, there will probably be better times to buy.
Joshua Massieh, a mortgage broker at Pacwest Funding, offers a personal experience. He and his wife rent a home that Massiegh says they couldn’t afford to buy. At the same time, they own several investment properties.
“The money I save by not purchasing a home is invested in rental properties in Indiana and Ohio,” he told us.
Sissy Lappin, founder of Lappin Properties in Houston, takes a contrarian view. Yes, prices are still high and so are mortgage rates. But if you have the income, now might be a good time to buy for those very reasons.
“Ask yourself this question: would you rather be competing against five offers and pay 10% over asking or be the only offer and pay 10% below the asking price?” she said.
In markets where inventory is still tight, buying a home in 2023 may be a challenge. But in markets where prices have softened, sellers may be more accommodating than in the past couple of years.
Martini says in recent months he has encountered sellers willing to close at below asking price, with closing credits as well as sellers buying down mortgage rates. Massieh has also found recent seller flexibility.
“For example, there is a program called a 2-1 buy down where the buyer can buy down the rate but needs a seller credit to do so,” he told us. “The buydown would help the buyer get into the 4% rate range and that is a huge difference!”