The 2023 spring homebuying season may be cooler than in previous red-hot years, but competition will still be plentiful.
According to a new Zillow analysis, ongoing stock shortages mean that even as fewer buyers enter the market this year, those who do will be competing for many of the same homes.
Affordable markets like Cincinnati and St. Louis are likely to see the most competition, especially on lower-priced homes.
The number of homes for sale now is equal to the number in 2021, which set a record for scarcity at the time. So while homes may sit on the market a little longer and sellers may have to make concessions, the chances of selling a home are still good, so long as the price is right.
“Affordability will still be a challenge for many buyers this year, but sellers who price and market their home competitively shouldn’t have a problem finding a buyer,” said Zillow Senior Economist Jeff Tucker.
“The slight drop in mortgage costs since October should revive demand after last fall’s slump, especially in more affordable markets and neighborhoods, but we are unlikely to see competition approach the fever pitch seen in the last two years.”
Buyers are watching mortgage rates closely.
A cooldown that lead some borrowers to sub-6% rates early in January pushed mortgage purchase applications up, while two weeks of increases made demand retreat.
Affordability is a major concern for Americans who have seen prices run up far faster than their salaries increase. Buyers now have to put down at least 18% on a home not to be cost-burdened month-to-month by their payments.
Analysts predict interest rates will fall by the end of 2023, possibly sinking to 5.2%. Sinking rates should encourage nervous buyers to start their home searches again, especially in more affordable areas.
The National Association of Homebuilders is expecting a housing market rebound as a result, continuing into 2024.
“Even as the Federal Reserve continues to tighten monetary policy conditions, forecasts indicate that the housing market has passed peak mortgage rates for this cycle,” said NAHB’s Chief Economist, Robert Dietz. “And while we expect ongoing volatility for mortgage rates and housing costs, the building market should be able to achieve stability in the coming months, followed by a rebound back to trend home construction levels later in 2023 and the beginning of 2024.”
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