2023 Home Buying Season: Heating Up?

Despite the higher interest rates buyers face in today’s market, home prices seem to be on the rise again because there simply are not enough homes available. Is leverage swinging back toward sellers for 2023?

It may be hard to believe, but open houses are starting to see lines of buyers eager to see the little inventory that is on the market. As we move further into spring, more and more eyes are on the housing market and how it will respond. Here’s what we’ve been seeing and hearing from our sources.

What others are saying

Redfin:

What Buyers Need to Know

• While the market is less competitive than it was last year, a lack of new listings means that you could encounter bidding wars on more affordable, move-in ready homes.
• Although inventory for existing single-family homes is tight, other types of homes—like condos or new construction—present a good opportunity now. Not only are they more available due to last year’s building boom, home builders are also more willing to negotiate on price and concessions in order to get inventory off of their books.
• Mortgage rates fell below 6.5% at the end of March, bringing some relief to buyers’ budgets.
  

What Sellers Need to Know

• Home prices are down slightly compared to last year’s highs, but they’re still higher than they were before the pandemic began. If sellers have owned their home for at least a few years, they have likely built plenty of equity to put toward their next home purchase.
• One of the biggest challenges facing today’s buyers is a lack of appealing, move-in-ready inventory, and new listings are coming on the market more slowly than they have since the start of the pandemic. If sellers put in a little bit of prep work and list this spring, their home will be one of the few options available to eager buyers (we specialize in this).
• We’re seeing bidding wars return in some parts of the market, while in others, sellers need to get more creative to get buyers interested. Offer to fill them in on local competition levels and what strategies they could use—like offering to help cover the cost of a rate buydown or advertising a flexible closing date—to attract offers.
  

Homelight

• Subdued seller’s market defines start of the year
• Concessions and contingencies make their return
• Agents strongly predict market rebound for spring
• Buyer interest and low supply reactivate a seller’s market
• Cash offers retain their appeal amid higher mortgage rates
• Bidding wars make a timid comeback in places, decline overall
• Homes must be well-priced and in marketable condition to sell
• Seller’s market due to low supply expected for spring 2023
  

Zillow

Recent home price resilience has resulted in Zillow’s latest home value forecast being revised up slightly compared to last month. The national Zillow Home Value Index (ZHVI), which rose 4.4% in the 12 months ending in February, is expected to rise 0.6% over the next 12 months.

• Zillow expects 4.3 million existing home sales in 2023, compared to 5 million sales in 2022. 
• Zillow forecasts ZHVI growth of 0.5% in 2023.
• These forecasts do not reflect the recent turmoil in the banking sector and subsequent changes to monetary policy, which have introduced fresh uncertainty to the outlook for the economy and housing market. For more information on how the failure of Silicon Valley Bank and the recent monetary policy decision made by the Federal Reserve, may impact the housing market, please consult these links.
  

Elevated competition — largely a result of persistently low supply —  in the housing market has led Zillow to revise up its outlook for home values, but revise down its expectations for home sales in 2023. The national Zillow Home Value Index, which rose 4.4% in the 12 months ending in February, is expected to flatten out to rise 0.6% over the next 12 months. This is a slight upward revision from February’s forecast, which projected growth of 0.2% in the next 12 months. A shortage of new for-sale listings is helping to buoy home prices even as elevated interest rates present affordability challenges for buyers.

Zillow expects 4.3 million existing homes to be sold in calendar year 2023 – a 14% decrease compared to 2024. This is down slightly from February’s forecast of 4.6 million sales in 2023. Weaker-than-expected performance of leading indicators of home sales, combined with a perceived increase in higher mortgage rates, drove the downward adjustment.

Our Market Observations – South Bay | Los Angeles

Real estate numbers across the South Bay of Los Angeles tell a similar story; buyer demand is preventing home prices from falling further due to the lack of homes on the market. In November of last year, rates hit 7% and spooked many prospective buyers due to the massive increase in estimated mortgage payments. At one of the slowest times of the year for real estate, with the holidays right around the corner, many buyers abandoned their home search with the hope that rates would drop back down.

Although the rates have come down, prices have seen very little impact relative to the increase in rates.

Moving forward, we are expecting rates to stay somewhat consistent which should help gain some confidence in the housing market. Keep a close eye on sharp increases in interest rates, as more are scheduled to happen this year according to the FED.

Buyers

Buyers in this market should be negotiating deals, as sellers have lost much of their leverage over the past 12 months. But keep in mind that inventory remains low for ALL of Los Angeles and much of the state. If buying real estate is one of your goals and you were a buyer in the market over the last 2 years but ultimately gave up because of stiff competition from conventional buyers, now is a phenomenal time to be a buyer because of the leverage you have on sellers. In this market, sellers will welcome FHA offers, VA offers, seller credits, repairs, and loan buy-down programs in order to sell you their home.

Sellers

Sellers in this market should be doing everything they can to distinguish their homes from others on the market. Presentation and condition are extremely important, so preparing your home for sale and making sure it looks and functions as best as it can is of vital importance if you want a successful sale. Doing so may result in multiple offers on your property, which would significantly boost your leverage with buyers.

And yes, we can help with all of this, all included in our standard commission! Learn more by visiting our Concierge Real Estate Services page.