Uncertainty Explained

Expect a year of uncertainty mixed with the market slowly trending in favor of buyers.

"We anticipate fewer home sales and fewer moves in 2023." Sales are predicted to not only be lower from 2021’s elevated level, but also may be the lowest in a decade as still high home prices and mortgage rates keep the cost of purchasing high. For households pursuing a home purchase in 2023, affordability will outweigh many other search criteria. Three major components that determine whether housing is affordable are incomes, mortgage rates, and home prices.

The stubborn issue of affordability is shutting out some younger buyers, potentially making the average buying age higher and buyers moving to cheaper states for affordable living. People are making moves cross-market to less expensive areas, the Midwest being on that list. Many of them will eventually move to more affordable markets especially if they’re able to continue working from home for distant employers.

The slowdown in home sales that began as mortgage rates rose is expected to continue, leading to a reduction in the rise of home prices and tipping the housing market away from sellers. Giving buyers more opportunity for concessions and room to negotiate. I think in 2023 we will see a gradual cooling of the market and slow shift towards buyers.

Houses are starting to sit on the market longer than the average since 2021; the current average days on market is about 30 days in the Fargo-Moorhead area. I expect current low inventory levels (number of homes on the market) to continue growing gradually as the turnover of homes slows due to the slower market activity. This means buyers will not face extreme competition compared to the last couple years and could be a benefit to them.

With the market changing so is the mindset of sellers. SOME sellers are no longer seeing multiple competing offers in 24 hours, all over asking price. Buyers are pickier with their money, 1. because they realize they can be, 2. because their money means more right now with the escalated rates. (Inventory is still currently low and some sellers are still seeing multiple offers and less days on market - these are sellers that priced their home right and got it ready for the market)

Mortgage rates are predicted to stay elevated, with slight declines as we have already started to see. Fixed mortgage rates have been a popular topic of interest lately, one article read "Taking out an ARM (adjustable-rate mortgage) instead of a FRM (fixed-rate mortgage) to finance 80% of today’s typical home list price saves nearly $225 per month or nearly $13,400 over the first 5 years. Put another way, today’s ARM rates are roughly the equivalent of early September’s fixed rates and help put a noticeable dent in the cost of buying a home." This is something to discuss with your lender to see what options best work for you!

The hike in rates may seem scary but we do need to remember the average mortgage rate from 1971 to 2022 is 7.76%. We were spoiled the last couple years due to the pandemic and are still feeling the shock from how fast the rates went up.

It is predicted that housing prices are to gain little to no appreciation in some markets for 2023 and also drop in other markets. "Existing home prices in 2023 are predicted to fall about 5% nationally," is a sentence I saw throughout a few articles. However, in the FM area including 2008 we have never seen a decline in appreciation. I think after the appreciation we gained the last couple years, which was a record high we will see a decrease but not to the extent of depreciation.

Sometimes we need that reminder to look at how much appreciation was gained over the last couple years, the appreciation over the last few years was a record high. After running the numbers, sellers most likely are still doing well and if they need or want to sell will walk away happy.

We most likely will see those who purchased homes in recent years at extremely low mortgage rates staying put or possibly seeing more owners keeping their homes as investments and renting them out rather than accepting a lower sales price.

Along with the market slowdown there is also a lull in new construction that could be a benefit to buyers. Unlike the previous couple years, builders are starting to offer incentives versus a year ago when there were zero incentives, and the purchase price would most likely be higher closing time. It's always a good idea to work with an agent when building so you can have someone looking out for you!

Homeownership isn't easy, but it's worth it

When talking with clients, I make sure they know the ups and downs of today's market. In today's market, buying a house does hold a little more weight.

Questions to think about would be, do I plan to live in this home for at least 3-7 years. This gives the market time to play out a little bit, and possibly you a chance to refinance. When buying an older home, am I willing to put some sweat equity or make needed upgrades. Buying older home is always fun, because they can be unique. Bust most times the bigger ticket items are hitting their last legs or the home altogether is outdated. It's a good idea to leave wiggle room for known and unknown updates. Updating however adds value to the home and builds equity for future sale. I always want my clients to be financially prepared and comfortable buying a home. The process itself is already stressful, the aftermath that is supposed to be exciting shouldn't be.

Always remember investing in yourself starts somewhere, and that somewhere might not be the $300,000 + home that you are wishing for. Getting started and out of the renting world paying someone else's mortgage honestly with just begins with getting you into a home and growing from there. I myself started in a 2-bedroom 1920's house, after sprucing it up a bit I sold it and used the money to get into a 3-bedroom 2017 home.

One of the many hats I wear as a realtor is being a coach, I want the best for you and you to enjoy the game, but I also don't want you to get hurt.