The housing market has been on a rollercoaster ride since the start of the pandemic. Prices rose by 40% over a two-year period, only to be followed by a sharp increase in mortgage rates that caused disparate expectations between buyers and sellers. Contracts were canceled, sales prices were reduced, and inventory levels were reduced. Fortunately, mortgage rates have been falling steadily for the past five weeks, which may offer some relief to buyers.
The Federal Reserve has also taken steps to reduce inflation, which had reached its highest level in decades, with rate hikes throughout the year. This has led to weaker growth and lower long-term interest rates, including mortgage rates. The housing finance sector has reached a turning point, with lenders, start-ups, advocates, researchers and policy makers actively pushing the limits of what is possible in mortgage financing. Homeowners now have access to high levels of usable mortgage capital, which provides support to withstand potential price drops and prevents housing difficulties from turning into foreclosure.
When it comes to home prices in 2023, cities that experienced a pandemic boom are expected to experience the biggest drops. Markets in the Midwest and Northeast are expected to hold up the best. Business-to-residential conversions are likely to remain more words than actions. For the first time in more than a decade, residential real estate around the world has entered a period of declining home prices. Overall, it is important for buyers and sellers alike to stay informed about the current market conditions and be prepared for any changes that may occur in the coming year.
With sufficient capital and knowledge of the market, homeowners can take advantage of opportunities that arise and make informed decisions about their real estate investments.