There’s a reason so many buyers have given up on purchasing a home — at least for the time being. The real estate market sorely lacked inventory at the start of 2022. And while inventory has picked up during the latter part of the year, there still aren’t enough listings to fully meet buyer demand.
Meanwhile, it’s gotten really expensive to take out a mortgage this year. At the start of 2022, mortgage rates were still quite competitive. But since January, they’ve risen sharply.
At this point, the typical buyer wanting to take out a 30-year mortgage is probably looking at an interest rate of around 7%. Compare that to the 3% rate buyers were looking at for the same loan product at the start of the year, and it’s easy to see why so many have made the decision to put their home searches on pause.
Interestingly, though, a large percentage of buyers who dropped out of the housing market this year plan to try again in 2023. In a recent HomeLight survey, 72% say they’ll resume their house hunting in 2023. But is that something you should plan on doing?
Right now, the housing market continues to lack inventory. But inventory could pick up nicely in 2023, and once that happens, it should narrow the gap between real estate supply and buyer demand. The result? Lower home prices.
While more housing inventory could definitely help cool the real estate market, even if listings pick up in 2023, there’s a good chance borrowing will continue to be expensive. Mortgage rates might also climb from their current levels, making home loans even less affordable. So even if home prices drop in 2023, the high expense of borrowing may mean that buyers won’t necessarily gain purchasing power.
If you’re in a strong position financially, then it could pay to pick up your home search in 2023 and see if there are more options to choose from. Granted, you might get stuck spending more on a mortgage, but remember, rates could easily drop over time. And once they do, you’ll have the option to refinance to a lower interest rate.
On the other hand, if you’re not in the most stable place financially, or if you’re worried about losing your job in 2023 due to a possible recession, then you may want to stay out of the housing market a bit longer. It’s important to be fully secure in your finances before taking the leap into homeownership. If you have any doubts at all, your best bet is really to sit tight, shore up your savings, and wait until you feel more stable job-wise.
You may not reach that point in 2023, and that’s okay. It’s better to buy a home when you truly feel confident in your ability to manage it. And if that doesn’t happen until 2024 or even beyond, so be it.
This article was written by Maurie Backman from The Motley Fool and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to firstname.lastname@example.org.