If you are thinking of buying a home in 2023, it is important to stay informed about the latest trends and market conditions. The real estate market is constantly changing and evolving and has been volatile in the past few years.
As we enter 2023, the real estate market is poised to be an exciting and dynamic space, with new opportunities for growth and investment.
In this guide, we’ll uncover the latest trends and insights into the current real estate market, so you can make informed decisions and write better offers when buying a home in 2023.
So, you found the perfect house, Congratulations! Now it’s time to make an offer and make sure it is accepted by the sellers so you can call this house a home.
But before you make any offers, you absolutely have to have the right information about the current real estate market trends and how they affect you as a home buyer.
- Low Inventory, High Demand is here to stay in 2023. Home buyers are facing increased competition when it comes to buying a home in 2023. This trend is expected to continue throughout the year, making it important for buyers to be proactive and have a clear understanding of their budget and preferences.
- Rising Home Prices: The low inventory levels and high demand for homes is also driving up home prices, with many experts still predicting a 3-7% increase in median home prices throughout 2023. This means that buyers will need to be prepared to pay more for the homes they want, and that they should also be prepared to make competitive offers that stand out from the competition.
- Interest Rates on the Rise: Another factor affecting the 2023 real estate market is the expected rise in interest rates, which could make home ownership less affordable for some buyers. However, the exact trajectory of interest rates remains uncertain, so buyers should closely monitor the market and be prepared to make decisions based on the latest information. So far, we are seeing rates stabilizing around 5%-5.5%.
- Homebuyer Incentives: To counter the rising prices and interest rates, some sellers and builders are offering homebuyer incentives such as seller paid closing costs or more upgrades from builders. These incentives can be a great way for buyers to get more value for their money, and they should be carefully considered when making offers on homes.
- Location, Location, Location: As always, location remains a key factor in the real estate market, and buying a home in 2023 is going to be no different. Homes in desirable neighborhoods with good schools and amenities are likely to command higher prices, but they may also offer a better return on investment over time. With tight inventory, it will be more difficult to get into neighborhoods you really want to be in.
Keep in mind that the real estate market is constantly changing and volatile. The past three years have seen different trends and conditions. The 2020 real estate market was different from 2021, and 2021 was different from 2022.
Even if you compare the first half of 2022 with the second half you will see a massive difference. You had to bid way over list price to get a home under contract in Jan-Jun 2022 and Jul-Dec of 2022 presented opportunities for homebuyers to negotiate lower prices and get seller concessions.
Multiple Offers are Back!
However, the first part of 2023 is looking like a very different marketplace with multiple offers, low inventory, and declining interest rates. Sucks…I know!
But you have to pay attention to what is happening in the marketplace before you go out looking for a home.
You see, a lot of your friends and family are telling you to wait because 2008 is coming but every single one of them have not looked at the bigger picture.
Below is a chart showing inventory levels in 2008 vs now.
Data Source: Minneapolis Association of Realtors
Data Source: Altos Research
“I keep being surprised by the data for home buyer demand and price strength. The percent of homes with price cuts fell again this week to 34.7%. Less demand than the frenzy of course, but significantly improved from Q4…
Median price of single family homes ticked up to $410,000. Prices are rising; slower than last year so the YoY increase is compressing. The slope of the price of the new listings is steep enough to show good buyer demand” – Mike Simonsen on Twitter on 01/23/2022
What to Consider When Making Offers on Homes in 2023
Making an offer on a house can be tricky, especially in a competitive real estate market. Unfortunately, not every offer results in acceptance, but don’t worry, I’ve got some tips to increase your chances of success.
Do you have your Pre-Approval letter handy?
First things first, come up with a financial strategy. Did you decide on what type of a home loan you are getting? There are so many options to choose from…
- FHA (3.5% + down)
- VA (0% down)
- Conventional (3%, 5%, 10%, 20%+ down)
- MHFA ($1,000 down)
- 203k and Conventional Rehab
- USDA (0% down)
- Jumbo loans
- Non-QA loans
- In-house privately insured home loans
- Are you getting a 15 yr, 20 yr or a 30 yr mortgage?
- Are you getting any Down Payment Assistance?
- Maybe you need go with one of the alternative financing options like a rent to own or contract for deed?
Having a pre-approval letter from a lender before you start house hunting shows the seller that you’re a serious buyer.
I can’t tell you how often I’ve seen buyers delay the pre-approval process until the very last minute when they found a PERFECT home but couldn’t get a hold of their lender because it was on a holiday weekend at 6 PM…and multiple offers were due by 9 PM that evening…
Heartbreaking! I know…
Seriously get all of your ducks in a row and be ready to strike!
Tip: have a loan consultation with your lender way ahead of time so you know what your best home loan options are. A lot of times, there are better home loan programs available that you aren’t aware of.
Shop within budget when buying a home in 2023
It’s important to have a limit in mind especially during negotiations and bidding wars because you are at the most vulnerable moment when you write offers.
Buying a home is highly emotional and a lot of times emotions get in the way (that’s why hiring a professional real estate agent is extremely important!).
Folks get emotionally attached to things, especially the ones they have to fight for or can’t get. You might have pictured your family get togethers…or thought about how you would decorate the living room and maybe even planned where your kids rooms would be…we all do it and thats OK!
It is also important to understand your personal max purchase price you are willing to pay. Not the max amount that you are pre approved for but the max price that makes your monthly payments within a tolerable range.
For example: you might be pre-approved up to $450,000 based on your income, debt and assets. But the monthly payment that you are budgeting for might be more tolerable around $375,000 purchase price.
In that case, look at homes for sale in the $350,000-400,000 range so you have room to come up on price if you have to.
Tip: when your loan officer sends you a pre-approval letter, make sure they are not putting your max purchase price on it and only include the address of the home you are offering on.
Consider getting an inspection. Even if you are in multiple offers
Common sense suggests waiving inspections when in multiples. Although it is true in many cases, it really depends on the market you are in. In 2021 and first part of 2022 you had to waive the inspection. In the second part of 2022 inspections came back and became normal again. As market normalizes, buying a home in 2023 will be less riskier.
In the early part of 2023 multiple offers re-emerged but I noticed that buyers are demanding inspections (and that’s how it should be). For example: I put up a listing on January 23rd, 2023. In the first 3 days we had 19 showings and 3 offers. 1 offer was at list price, 2 offers were above list price but each offer had an inspection contingency.
Getting a home inspection can be a valuable tool in protecting your interests and it doesn’t necessarily mean you will automatically lose out in a bidding war. If your offer is well written, has good terms and provides a financial benefit to the seller – you have a good chance. Sellers want certainty over anything else so consider making your offers in such a way that provides you with protection and gives sellers certainty.
Tip: There is one unique thing I do when writing offers for home buyers that I work with and I’d be happy to share it with you! It gives sellers certainty and protects you as a home buyer from making a mistake.
Sellers want certainty
Avoid writing demanding offers with aggressive terms. It’s not always just the price that sellers are looking for. Response deadlines, long and vague inspection contingencies, no hard earnest money offers (no skin in the game offers), escape clauses and so on are all red flags to sellers.
Sellers want to sell their home quickly and smoothly, so try to simplify the process as much as possible. This can include minimizing contingencies and clauses in the offer.
Another part of the offer includes an amount of earnest money held in escrow. The larger the check, the more serious you appear as a buyer. But remember, this money may not be refunded if your deal goes south.
Tip: Have your lender call the listing agent and re-assure them that your deal is solid and there will be no surprises.
Hire a professional real estate agent
You shouldn’t be buying a home on your own. Use your agent’s experience and expertise! They’re a valuable resource in understanding the market and drafting a successful purchase agreement for you. They can also help you navigate the process of making a good offer on a home you like to help you seal the deal.
In conclusion, the 2023 real estate market is poised to be an exciting and dynamic space, with new opportunities for growth and investment. By staying informed about the latest trends and market conditions, and by being proactive and prepared, buyers can increase their chances of making winning offers and securing their dream homes.
I specialize in helping buyers navigate the home buying process and would love to have an opportunity to help you!