A look back at 2022 trends including interest rates and buyer power followed by 2023 projections for the housing market.
As we consider what’s on the horizon for 2023, let’s begin with looking back at 2022. Diving into interest rates, we see they started out at 3.22% in January of 2022 and reaching a high of 7.08% in October 2022. As interest rates saw an uptick, the most impacted group were the first-time home buyers. The rise interest rates created a decrease in buyer power for these buyers and they were pushed to quickly adjust and align with the market.
Considering these rates increase the market became more balanced for buyer and sellers. Buyers were afforded the right to ask sellers to complete repairs revealed during the home inspection and request sellers to cover a portion of their closing costs. In the previous two years, to present a competitive offer, buyers needed to offer thousands of dollars over the asking price, waive appraisal contingencies, accept the home without repairs and without any closing costs paid by the seller. In today’s market, homes that are priced correctly, in great condition, and in highly sought-after areas, may still see multiple offers and could potentially sell for above asking price.
Interestingly, 2023 is shaping up to mirror 2018. For comparison, we gathered data from quarter four of 2018 and quarter four of 2022. We noted the number of closed homes were very similar which appears to show a balanced market is returning.
We expect 2023 to be very close to 2022 sales volume which totaled $4,246,495,404. Keeping this in mind, we know that NWA is ranked number four in the nation, per the National Association of Realtors (NAR), to see an increase in home prices during 2023. “This is one of the emerging tech hubs where the typical family can still afford to buy the typical home.” Nationally, closed home sales are expected to be 14.1% lower.
We expect to see an increase of 3% to 7% in home values in 2023. The range of 3% to 7% may be explained in a larger level of inventory and convenience of travel to specific areas in NWA.
Sellers will continue to hold equity and buyers will regain buying power as the market continues to balance. Buyers will continue to have the opportunity to negotiate repairs and additional items such as home warranties and closing cost. This will be seen in the new construction market as well. New Construction concessions can include upgraded finishes, fencing, and closing costs to name a few.
Interest rates will continue to fluctuate in 2023 but are expected to level around 5.5% to 6% by the end of summer and early fall. As there is an expectation of interest rates decreasing in 2023, mortgage lenders are offering programs that allow buyers a one-time refinance at little to no costs. As we consider the 7.76% historical average of interest rates over the last 30 years, you can see that NWA is headed towards a balanced market for buyers and sellers in 2023.
Predictions in this article are only opinions and not a definite.