After several abnormal years for the real estate market, 2023 may be the year that brings us back to some form of normalcy. However, this market will continue to face the same challenges that emerged last year: mortgage rates are more than double what they were a year ago, while 2022 prices rose around 11% in many areas of Colorado, putting a serious strain on affordability.
Let’s take a look at some of the big questions people are asking about real estate heading into 2023.
Will Prices Drop?
The steep rise in mortgage rates slowed the pace of the market in 2022, and even yielded some price declines in the later months of the year, combined with the seasonal slowdown. But again, overall home prices rose by around 11% year-over-year, a clear sign of the strength in Colorado’s housing market. Now, with mortgage rates taking a dip, this could lead to more demand from buyers, which would further outweigh supply and potentially make home prices rise further this year.
Another major factor that will influence pricing is housing inventory. In many areas of Colorado, we saw inventory double or triple since January of 2022. For instance, the Denver Metro saw active single-family listings increase from 1,688 in January to 3,667 in December, reaching as high as 7,633 in September. If inventory continues to climb this year, we will experience an inverse effect on home prices based on supply and demand.
Will The Market Crash?
There is a debate about whether the housing market will crash, or if it will simply correct itself from the frenzy of the last several years. Perhaps the biggest point to focus on here is homeowner equity, which is higher than it’s been in several decades. Unlike 2008, homeowners now have substantial financial security, making a true crash hard to imagine. A key point to keep in mind is that the mortgage products and lending practices we see today are much better than those prior to 2008.
Nicole Bachaud, an economist at Zillow, points out that “There are a lot more regulations and restrictions in the mortgage markets that make it a lot stronger, and less volatile and less risky.” Lenders aren’t handing out loans to anyone these days; borrowers have to qualify against stricter guidelines to get their loans underwritten.
Should I Make a Move This Year?
When it comes to buying or selling your home, everyone’s situation is different. While it’s true you shouldn’t try to time the market, buying or selling a home is a major financial decision. Your job, family, and lifestyle all come into play when making that choice, and it’s important to be honest with yourself and to speak with a real estate professional to help you identify the pros and cons.
