After sifting through research from various resources in our industry (including Keeping Current Matters, Buffini, Realtor.com, and NAR), here are the Hatch Homes Group’s predictions for home buyers for 2023.
Many of the sources we consulted refer to what’s happening in housing nationally, and it’s important to note that, while this data does inform trends in our area, taking these numbers at face value is like applying a national weather forecast to our local area. That’s why it’s so important to interpret national statistics through a Portland-centric lens.
The four important market indicators we analyzed are home price, mortgage rates, home inventory, and sales volume.
Overall, there is a wide range of national predictions as to what will happen regarding home prices from 5% increase in price to 5% decrease in price. The average of our sources says home price will increase ever so slightly, but certainly not as much as it has in recent years. In the Portland metro area, it’s also important to note that there are some neighborhoods that are not thriving where prices will likely decline. Similarly, there are neighborhoods in Portland that tend to see year-over-year increases no matter what the national market predicts. On average, however, our prediction for home price in 2023 is that home prices will increase by about 0.5%. This is good news for buyers because it’s not a drastic increase.
2022 saw a lot of volatility in mortgage interest rates. The sharp increase in rates over a short amount of time saw many buyers disillusioned about the home buying process. Nationally, predictions vary for 2023. However, our conservative prediction is that rates will come down to the high 6s. We also predict that there will be more stability in interest rates. It is important to note that predicting mortgage rates is very difficult because of economic and global factors that contribute. Ultimately, every buyer will have to run their finances to figure out a monthly payment that makes sense for them; however, we encourage buyers to look at the full picture of why this may be a good time to buy instead of honing in on just interest rates.
Sales volume is predicted to decrease from previous years. We agree that this will be reflected in Portland, but what does this mean for buyers? Let’s look at our fourth metric, which goes hand-in-hand with sales volume.
Nationally, inventory is expected to hover slightly lower than where it has been in recent months. Our prediction is that inventory will remain relatively low. Sellers locked into a low interest rate are less inclined to sell if it means they will have to buy their next home at a higher interest rate, so sellers are only going to sell if they are motivated to or have to. We predict we will stay in a seller’s market where inventory is still in demand. With few new builds happening and a population still moving to the area, as well as millennial buyers who are increasingly able to afford to buy, there will still be more buyers than available properties in the Portland metro area.
PROS/CONS for Buyers in 2023
CON: higher interest rates affect affordability
While monthly payments are higher than they have been in recent years, buyers are able to buy a home close to list price. In recent years, buyers often had to fork out cash over list price – and sometimes $50 – $100k over – whereas with a high interest rate you know what your monthly payment will be when you start your buying journey. Buyers in recent years also often had no negotiating power and so took on properties that needed costly repairs that they would have to spend extra cash on, whereas in the current market we are seeing room for repair negotiations as well as buyer incentives.
CON: lower year-over-year appreciation
Buyers in the pandemic market saw double-digit appreciation year-over-year appreciation. However, this is not sustainable. Just because your appreciation is lower doesn’t mean your house value is depreciating. It just means that it’s taking a little more time to build that equity, which is ultimately more typical than what we saw during the pandemic. Especially compared to renting, which is 0% appreciation, a slow and steady appreciation is a healthy way to grow your wealth.
PRO: fewer multiple offers
You get to see the house multiple times before you make an offer. There is less competition, so you can see multiple houses in your price range before choosing which one to make an offer on. Fewer multiple offers on a property means higher likelihood of your offer being accepted.
PRO: more lending options
Lenders are getting creative with lending options and sellers are also being coached to offer buydowns or other incentive to help buyers.
PRO: FHA and VA buyers have a good chance of getting into a home
During the pandemic, many FHA and VA buyers couldn’t compete with cash offers and offers where the appraisal gap could be waived. In the current market and in 2023, FHA and VA buyers will be more able to compete with conventionally financed offers.
Watch the full video here to see us talk more in depth about these predictions with all all of the data and graphs!