Brian Decker’s 2023 Housing Market Recap This year's housing market was tough for both home buyers and sellers. Interest rates went up, housing inventory went down, housing prices stayed stagnant, housing sales decreased, and overall it has been more affordable to rent than to buy. Let's dive deeper into a recap of the 2023 housing market. Interest Rates Went Up 2023 consisted of high interest rates. They rose, and rose, and rose again. This is a classic economic method used to curb inflation, as high inflation is the second issue we are dealing with. However, raising interest rates posed a need for larger loans, ultimately, pricing out many prospective buyers. This was not helpful for buyers, or sellers. Housing Inventory Went Down Housing inventory decreased significantly in 2023. Many benefitted from very low interest rates during COVID, so with rising interest rates, why would homeowners want to buy a new house for a much higher cost? Ultimately, many homeowners lost interest in selling and decided to stay put. For the homeowners that did decide to put their homes up for sale, low and minimal offers were coming in, so homeowners were pulling their listings from the market. The only markets that saw a continued increase in inventory were housing markets with significant new construction activity like Dallas, Austin, Tampa, Nashville, Seattle, and Phoenix. Prices of Homes Did Not Go Down Typically, high-interest rates decrease housing demand, causing the market to lower costs in an attempt to raise demand again. However, this was not the case in 2023. Despite high-interest rates, there was still a demand for housing. With little inventory and high demand, housing prices stayed elevated. Cities that have a high level of new construction inventory did see 5% to 10% price declines, however, markets with low new housing construction activity like San Diego, Scottsdale, Boston, Hartford, and Orange County saw home prices tick higher. Home Sales Dropped Along With New Construction The increase in interest rates, decrease in housing inventory, and steady demand sparked new construction in 2023. The year’s first half was promising, as many new apartment complexes and homes were built. However, as interest rates continued to rise, construction workers faced roadblocks. Getting financing for construction was difficult, and therefore, housing inventory declined again in the second half of 2023. It Was Cheaper to Rent Than to Buy Over the last few years, the cost of rent has gone up dramatically. This year, it finally stabilized and increased at a lower rate than what was experienced years prior. The increasing interest rates raised the price of lending, making it cheaper to rent than to buy. This also shifted consumer behavior as most potential buyers decided to save money by renting as opposed to buying at a higher price with a higher interest rate. Overall, 2023 was not the best year for the housing market. We saw increased interest rates, decreased housing inventory, and increased demand for renting. While housing prices did not dramatically rise, they did not decline either. Next year could see potential changes in the market. With mortgage rates moving lower in December by 1% and with the Federal Reserve planning several rate cuts in 2024 my prediction is that home sales will increase by 15% in 2024 and markets with low new construction inventory will see a 5% to 8% increase in prices. Brian Decker Senior Loan Officer Click to Call or Text: 844-4-Modern This entry has 0 replies Comments are closed.