Real Estate 2023: How Will Home Prices Fare This Spring?
April 14, 2023
Spring is here, and you might be ready to make a move. Perhaps you’re hoping to avoid the sky-high prices and bidding wars of the past few years, but you know inventory is still relatively low in many areas.
House prices increased 5.3% from January 2022 to January 2023, according to the Federal Housing Finance Agency. Of course, this varies greatly by region, including a 1.5% decline in the Pacific division and a 9.6% gain in the South Atlantic division.
To help you go into the process as informed as possible, GOBankingRates spoke with several real estate experts to get their input on where home prices will be this spring.
Also see the outlook for the rest of the year.
The Sellers’ Market Is Slowing
“The blistering hot seller’s market that most of the country witnessed the past few years is generally cooling,” said Jay Thompson, co-founder and head of industry relations at AgentLoop, based in Austin, Texas. “Gone — in most markets — are the days with severely restricted housing inventory causing multiple-offer bidding wars, as well as offers over the listing price.”
He said most areas still have not entered a true buyer’s market, but things are looking promising.
“Inventory is increasing — more opportunities to buy — and bidding on a home isn’t quite as competitive as in the recent past,” he said. “This is a plus for homebuyers.”
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Home Prices Are on the Rise
“The spring market has historically been a positive trend in the world of real estate,” said Ralph DiBugnara, president of Home Qualified and senior vice president at Cardinal Financial, based in New York City. “What we usually see in the second quarter is lower interest rates, active buyers and sellers and upward trends as far as new building of homes.”
In the second quarter of 2023, he said he expects to see a rate reduction, with the 30-year fixed mortgage hovering around 6.5% and the 15-year fixed mortgage averaging 5.875%.
DiBugnara said the reduced rates will be the result of the Fed easing off interest rate hikes because of increased unemployment and decreased inflation.
“Ultimately, I believe they will stay stagnant for the end of [the] second quarter and early third quarter,” he said, “depending on how consumer spending slows down.”
However, he noted that housing supply is very limited, and he doesn’t believe this will change soon.
“Lowering of rates [means] buyers will be out shopping, but what they will most likely find is a competitive market, including some bidding wars and a short supply of homes for sale,” he said. “Home values and prices are on the rise and will stay that way for the remainder of 2023.”
He doesn’t believe the frenzy of 2021 and early 2022 will be repeated, but he noted that the shortage of homes for sale is having a huge impact on prices.
“Buyer competition is heating up and, if rates drop at all, it will only get worse,” he said. “It’s actually advantageous for buyers who are able to look now while rates are higher, if they want less competition.”
If rates drop down to 5%, he said, it’s inevitable that another major buying frenzy, accompanied by rising prices, will occur.
Competition Is Back — in Some Areas
“While we saw reports in major publications in the last few weeks stating home prices fell for the first time in 11 years, they actually rose in our area,” said Amy Cherry Taylor, Realtor and associate broker at Amy Cherry Taylor & Associates in Greater Fredericksburg, Virginia.
She said real estate is hyper local, so buyers and sellers need to know their local markets.
“Inventory is extremely low in our area and many, many areas throughout the country are experiencing this shortage as well,” she said. “Now that mortgage interest rates have settled and are at the lowest point they have been in the last seven months, buyers are really coming out of the woodwork to purchase, and competition is starting.”
Unfortunately for buyers, some of this might sound like a bit of dreaded déjà vu.
“Competition in our area is breeding multiple offers, which result in over-asking price offers, appraisal gap coverage and minimal inspections,” she said. “If the low inventory trend continues and interest rates stay more stable, housing prices will not go down during the spring market.”
Essentially, there’s no sure way to know what home prices will look like across the U.S. this spring. To be as informed as possible, follow Taylor’s advice and learn as much as possible about your local market before starting your search.