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If you plan on buying a house in the Spring of 2023, you might consider this year as the great real estate industry adjustment.
After two years of a pandemic-fueled upsurge of homebuying, including bidding wars, a lack of inventory, and big price increases, things began to cool down toward the end of 2022.
Due to inflation and rising interest rates, the real estate market saw fewer sales and slower appreciation of prices throughout last year.
This period of transition is still largely continuing in 2023. Sellers still have an advantage in certain areas because of a scarcity of homes, yet no one is predicting a sudden decrease in house values or prices.
Nonetheless, the 2022 fervor has certainly diminished and numerous analysts anticipate a somewhat more even market—likely benefiting purchasers.
But before you start your house search now that the warmer Spring weather is approaching, you must understand the new fundamentals of buying a home in 2023.
Will the low inventory of homes continue for the Spring of 2023?
The housing market had a big shortage of inventory even before the pandemic—there were not enough houses to meet the demands of buyers. This trend further intensified during 2020 but is beginning to improve now.
Since May 2022, the inventory has been on the rise, with the largest month-over-month increase since then in November 2022, which was 46% higher than the same time the year before.
Let’s look at some strategies for the home buyer’s market for the Spring of 2023.
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Buying a home in Spring 2023—what to do about low inventory
Homebuyers in a low-inventory market must act quickly. The most desirable properties will likely be taken off the market quickly.
In November 2022, the average time a home was available was only 56 days—which was 18 days less than usual before 2020. With a limited amount of time available to look for a home in a scarce market, there are some ways to adjust to the new housing realities.
To get the house you really want, be ready to forgo some of the features you don’t really need. Find a home that meets your budget in the most desirable area and modify it over time.
Broaden your search with the right real estate agent
Is the location you decided to purchase too hot? Some areas not as popular with homebuyers may have a hidden gem that fits your criteria—and at a lower price!
Connecting with a real estate agent who is well-versed in the region is an ideal way to locate a good home that meets your financial plan and lifestyle.
Start the preapproval process as soon as possible
Obtaining preapproval for your mortgage before beginning a home search is crucial in any market, not just a seller’s market with low inventory.
It’s even more important when the supply of homes is limited. If you don’t have your preapproval before entering a market like this, you could lose the home you want to another buyer who did the right thing and got preapproved.
Buying a home in 2023—what to do about rising prices
The national median home price for active listings rose 11% to $416,000 in November 2022 compared to the previous year.
This rate is slower than the 16% average growth rate seen in the months of June and July, indicating that the pace of home price growth may be slowing down, but 2023 will likely continue to be a year of sluggish growth.
As the demand for homes remains strong and a scarcity of properties continues, property prices are not likely to decrease drastically. There can be minor price dips from month to month, typically after summertime highs. However, prices will likely stay above the starting levels of 2020.
Know your limit and stick to it
When looking to purchase in this market, you must know the amount of house you are actually able to afford. Make a commitment to yourself to remain within that budget. Don’t give in to the pressure to purchase because others are taking the good homes off the market.
And definitely don’t get caught up in the thrill of any bidding wars. It’s the quickest way to overspend on your budget. The affordability and your true attachment to the house should be your main focus.
Ensure your house payment does not exceed 25% of your total monthly income after taxes. Your calculations should include principal, interest, property tax, home insurance, HOA fees, and—in the case of a down payment lower than 20%—private mortgage insurance (PMI).
Save more for a down payment
Save up for a down payment of at least 20% to avoid PMI.
While first-time home buyers can often proceed with a lower percentage (5% to 10% is often viable), PMI will be part of the equation. Disciplining your spending and earning to achieve a higher down payment can also save you a significant amount in interest payments down the road.
Place your down payment savings in a high-interest account
One positive aspect of inflation and the Federal Reserve’s response has been higher interest rates for savings accounts.
Store your deposit contributions in a high-yield account if you haven’t already. Just make sure you have ready access to your funds when it’s time for closing. Some online savings accounts take three days to deliver your funds when you take them out.
Lock in your mortgage rate
When you’ve found the right lender and are submitting an application, inquire about locking in your rate. It may not be the time to take a risk on your monthly mortgage payment suddenly skyrocketing in cost just before you’re all set to close.
The bottom line on Spring 2023 home buying
Regardless of what the real estate market may be doing at any given time—a seller’s or buyer’s market and everything in between—there is never a perfect time to buy a home.
If you’re considering purchasing a house or refinancing one, everyone has different goals and objectives.
At Homefinity, we recognize that your mortgage needs must be tailored to your life. Whether you’re looking for a specific mortgage product or need more detailed advice, somebody who can help you navigate your way can be invaluable.
Our nationwide loan officers have decades of collective experience and can assist you through your home investment journey.
From start to finish, we provide friendly, trustworthy advice and tried-and-tested, analytical understanding to get you the most appropriate personalized rates available.
Reach out to us and get started with finding the right home loan you can afford for the house you deserve.
Image by Paul Brennan from Pixabay