Housing Market 2023: Is the Pressure About To Shift to Sellers?
Written by
James Holbach
Edited by
Amber Barkley
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The U.S. housing market is constantly in flux, influenced by myriad economic, demographic and social factors. In recent years, rising interest rates have been a powerful influence on the market. That and other factors have combined to create an environment that heavily favors sellers — meaning home prices are being driven upward by limited inventory and a high level of competition among buyers.
A buyer’s market obviously means the opposite, when prices are driven down by a glut of inventory from more homeowners looking to sell than there are buyers. While there are a few indications that the current seller’s market may be starting to shift in favor of buyers, it’s currently hard to guess what the future holds.
Is a Buyer’s Market Coming?
Real estate and residential construction expert Jeff Kutas, founder and CEO of MB Sentinel, believes that if a buyer’s market is coming, it’s not happening any time soon.
“While we are seeing some factors which historically have trended with a buyer’s market, such as homes staying on the market for an extended time, we’re not likely to turn the corner very quickly,” Kutas said. “Perhaps more than anything else, high mortgage rates and the ‘lock-in effect’ are at play here.”
Impact of the Lock-In Effect
The “lock-in effect” occurs when prevailing interest rates have risen quickly. That means that most homeowners with existing mortgages would pay a much higher interest rate on a new mortgage, which creates an incentive for them to stay put, reducing the amount of inventory in the market. In fact, recent data from the Federal Housing Finance Agency indicates that 85% of homeowners with a mortgage have a rate under 6%.
“These are the homeowners who need to consider upsizing in order to create new inventory in the market,” Kutas continued. “However, there’s just no financial incentive for them to do that in the current economy. That means there is going to remain a large delta between the prices that sellers want and the prices that buyers can afford. That won’t create a buyer’s market — just a slower one.”
Some Signs Point to a Buyer’s Market
Not every expert agrees that it’s going to remain a seller’s market for the foreseeable future. An important truth about the U.S. housing market is that it can vary a lot at the local level. There are always certain areas that buck the national trend to some degree. Even during the housing bubble of the 2000s, when prices crashed all over the country, certain markets were relatively unfazed. The same is true of today’s market.
“In some regions, it’s already shifted [to a buyer’s market]; for example, in NYC, it has already become a buyer’s market. I believe it will trickle to other regions,” said New York realtor Vickey Barron of Compass.
Priscilla Hammond of Desari Jabbar Realty Group also thinks a shift might be likely. “I do believe it will shift to a buyer’s market if interest rates don’t go down. Since a large percentage of homeowners nationwide have a decent amount of equity in the homes they own, I don’t see it as a huge detriment to sellers,” she said.
Advice for Sellers
If you’ve been pondering a home sale in the near future, or are undergoing a life change that will necessitate the sale of your current home, the possibility of a buyer’s market is obviously concerning. While there’s really nothing you can do to influence where the market is headed, there are some steps you can take to get the best possible price for your home in a buyer’s market.
“Owners must pull out all the stops to make their property show its best,” said Barron. “If there is no budget to do necessary renovations, i.e., landscaping, painting or upgrading kitchens, at minimum, the home must be decluttered and organized. The windows should be cleaned; closets should be organized — the better it shows, the higher the chance of attracting a buyer.”
Of course, if you can afford to make updates, you should certainly consider it. Even on a small budget, there are cosmetic fixes and updates that will make your home more appealing to prospective buyers. A survey conducted by Zillow showed that air conditioning, private outdoor space and an en suite bathroom are all among the top features buyers look for.
Finally, make sure you find an experienced agent for your home’s listing. A good agent can advise you on how to update, market and price your home, as well as help you with negotiating. Do your homework, and don’t be afraid to find a new agent if you decide your current one isn’t a good fit.
Be Prepared
It’s impossible to predict where the market is heading, but if a buyer’s market is coming, the best thing you can do is be ready for it. Stay informed about conditions in your local market, as well as the regional and national market.
Most importantly, be patient and be flexible — market conditions are always changing and could become more favorable at any time.
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