What trends can we expect for the 2023 spring home buying season? originally appeared on Quora: the place to gain and share knowledge, empowering people to learn from others and better understand the world.
Answer by Aniva Hinduja, Credit Karma General Manager, Home & Mortgage, on Quora:
There are four major themes we’re tracking for spring 2023. Spring is typically a popular time to buy a home, as more people tend to put their house on the market in early spring through summer, but that’s not to say buyers will get a better deal, especially in today’s market. Currently, sellers might be less motivated to sell considering most American homeowners with mortgages have rates at or below 4% – significantly lower than the average mortgage rate today.
Home buyers and sellers are keeping a close eye on the economy as it continues to fluctuate. There is no clear signal for buyers or sellers that says “now is the time” to buy. The economy continues to send mixed signals, so this spring may feel like a different home-buying season than usual as affordability issues remain intact and inventory remains low.
Mortgage rates
You can’t really predict mortgage rate trends, but they usually move in lockstep with the Federal Reserve’s interest rate and are a reflection of the economy.
While home prices are starting to ease, high mortgage rates remain a primary affordability hurdle for today’s homebuyers, impacting the buying power of potential buyers who need to consider that even the smallest increase in mortgage rates can result in hundreds, if not thousands of dollars added to their monthly mortgage payments.
Credit Karma’s Home Affordability Calculator is a good tool for potential buyers, as it provides a sense of how much they can afford to pay for a house, what their estimated monthly payment will be, and how potential buyers may be impacted by changing interest rates.
Inventory
A low supply of homes continues to be a problem in 2023 as record low-interest rates from the past few years keep homeowners staying put. Inventory is a crucial factor to affordability as lower inventory results in more demand and higher prices. As current homeowners are less inclined to sell, the lack of supply will keep home prices relatively high, meaning home buyers will need to over budget for the home they plan to buy, potentially needing to pay over asking price.
Yearly seasonality impacts home inventory though, and we might see more homes hitting the market this spring and summer. We may feel a slight reprieve from inventory constraints in the coming months, although it won’t be a record home buying season. In fact, Realtor.com data shows that active home listings in April 2023 were ~50% below levels seen in April 2019.
Home price easing, yet, still elevated
Even though we’re just beginning to see signs of home prices starting to ease, they still remain high considering how drastically home prices surged during the pandemic homebuying boom, spurred by record-low mortgage rates and an increase in remote work. While it’s a promising sign, homebuyers shouldn’t expect to lock in any deals given inventory and rates still remain significant blockers.
Employment contingencies
Additionally, with the wave of recent mass layoffs, we’re seeing employment contingencies in place with real estate contracts. These contingencies protect workers who have been concerned about the recent wave of layoffs, and if they lose their job before closing they can call the contract void.
This question originally appeared on Quora – the place to gain and share knowledge, empowering people to learn from others and better understand the world.
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