It seems that, depending on whom you ask, the US home market will either be a seller’s market or a buyer’s market. Even real estate professionals are unsure about this. Many factors can make the US housing market a seller’s or a buyer’s market, given its size.
So, will 2023 be a buyer’s or seller’s market? We evaluate the numbers to tell investors whether 2023 will be a buyer’s or seller’s market. We know they can affect strategy planning, so you should be mindful. Read on to learn if 2023 will be a buyer’s or seller’s market for home market projections and estimate home value.
Was The US Housing Market A Buyer’s or Seller’s Market In 2022?
2022 remained a seller’s market, per Nerdwallet. Not enough properties were available to fulfill buyer demand. Investors fought over homes as values soared.
When Was the US Housing A Buyer’s Market?
In 2011-2013, experts called the US home market a “buyer’s market.” It followed 2008’s US recession. The buyer’s market lasted several years. There’s no sign of the real estate market turning buyer-friendly again. Here are some trends that correctly forecast a seller’s market in 2022:
1. Low Unemployment Rates
In 2022, employment was low. When COVID-19 hit in 2020, short-term rentals seemed doomed. Minor and major enterprises closed down. It was every investor’s worst nightmare.
Staying home was needed. Millions lost jobs, increasing US unemployment. The Fed intervened fast, and the situation improved. Fast forward to 2021, we see a dramatic increase in savings rates. A total of around 11 million jobs were available.
2. Inflation Remains High
Skyrocketing inflation is triggered by geopolitical conflicts on the opposite side of the world. Russia is a major oil and gas exporter. It prompted global energy prices to rise, making budgeting untenable. The US has adequate oil reserves since it imports less than 4% of Russian oil. The current condition affects consumers; it’s discouraging for buyers. Choosing a good location for your future investment may help.
Another thing to think about is:
Due to inadequate inventories, many borrowers are defaulting on their loans. It motivates them to sell their home instead of foreclosing. The US home inventory declined to 729,000 listings in February 2022, the fifth consecutive month of decline. There will be a significant increase in inflation in 2022 as rent and housing costs continue to grow.
3. Mortgage Rates Over 6%
A big announcement about mortgage rates was made in April 2022. 30-year fixed-rate mortgage topped 5% since 2011, and the 10-year ARM was 4.3%. More buyers seek lower-cost, adjustable-rate loans because rising mortgage rates can create a buyer’s market. High mortgage rates reduce a buyer’s chances of getting a fixed loan.
Regardless of the market, investors often seek protection. That’s why some investors acquire mortgage-backed securities (MBSs) instead of traditional mortgages. Many bond investors anticipate a return of inflation in 2023 and are hedging their bets by purchasing assets with a higher inflationary potential.
The FED has aggressively raised rates and signaled that it would continue to do so, placing the US economy at significant risk of a recession because of the impact on real estate markets and housing affordability.
4. Working Remotely to Save Money
More people will work remotely to save money in 2022, as predicted. It is another pandemic 2020 effect. In 2020, organizations had to train their employees to work remotely. 16% of organizations globally are entirely remote, according to research.
How does this affect the housing market?
It’s not ideal, which is why the US home market is a seller’s market. Remote workers in pricey areas sold their homes and moved to low-cost regions.
5. Suburbs Becoming More Expensive
NerdWallet says “family-friendly” neighborhoods are appreciated the most. The influence of the millennial generation can be seen reflected in this tendency.
200k millennials will turn 32 in 2022. What’s the significance? This population will propel property prices over the next two years. Does that suggest property prices will climb even in 2023? We’re almost there!
6. Renters And Rental Prices Have Risen
In Austin, Phoenix, and Miami, rents rose over 40% as tenants increased. Rental rates rose 14% countrywide by December 2021. More millennials married, started families, and sought homes in 2022. With mortgage rates rising, fewer young families can afford a home and must rent.
The Guardian reports rental prices are up 13%. It burdens 50% of renters, who spend a third of their monthly salary on utilities. We should expect energy costs to surge and the housing crisis to continue due to inflation, the Russian invasion, and high mortgage rates. Rents and housing prices will rise. Prices, rent, and mortgage rates are high. Low demand may have made 2022 a bad year for the US property market.
2023: Buyer’s or Seller’s Market for US Housing?
According to Bank of the West chief economist Scott Anderson, “Poor housing affordability and a weakening economy will impede home price appreciation.”
Does that suggest 2023 will be a buyer’s market? Not exactly. The buyer’s market seems distant. 2023 will be a seller’s market. With high demand and low supply, housing prices are projected to rise.
Don’t take a prediction too seriously. As we’ve argued before, investors need a broader perspective.