The housing market has seen a lot of ups and downs over the last couple of years. Sometimes, this market proved beneficial for buyers – particularly those interested in the small market.
Other times, it benefited the sellers. Unless you are lucky enough to catch a real estate bubble, the home prices will not be that friendly to you as a buyer.
Last year was a very good year for selling a house, as an example, but only if you were the seller. As a buyer, you would find it more difficult to get your dream home without becoming indebted for the rest of your life.
But what will happen to home prices next year? Will they remain high, or do you have a fighting chance of buying your own dream house?
Like the weather forecast, we can only make approximate assumptions – but they are just enough to give us an idea.
The Surge in Home Prices
It’s true, 2021 and 2022 saw a surge in home sales, with more and more individuals looking to sell their old homes and buy new ones.
The pandemic and continuous lockdowns made people more appreciative of outdoor spaces. Those who did not care much for gardens are now looking for spacious backyards where they can catch a little sun.
This surge in demand has led to an increase in prices in 2021. There were more demands for homes than there were houses on the market.
At that point, the same home would get about 20-30 offers before it was sold and taken off the market. The low supply mixed with the demand caused prices to soar.
The same thing applied in 2022. While more homes were built, there were still not enough to keep up with the demand.
Florida saw a massive surge in prices as well after more people decided to relocate to the sunny lands. Houses were off the market within a matter of hours, so we may expect the market to still hold strong.
Home Prices in the Next Quarter
As mentioned, home prices are increasing as a result of supply and demand. The supply is low, and the demand is still there, which means the prices are not going to drop. However, they are softening slightly.
With the high mortgage rates and high home prices, people are wary of buying a new home right now. Many of them have decided to wait it out until the prices go lower or until they can find their dream home at a better price.
This decrease in home sales does not make the prices go any lower, but it does make them stay in the same place. At least they will not get any higher.
Real estate experts say that home sale will go down by 16.2% by the end of this year, the trend following into the next year.
Many are wondering if this is some kind of recession in the housing market. In a way, it is – but it’s not bad enough to cause worry. These bubbles are rather common throughout history.
This particular recession is caused by the past six months when fewer homes were sold. While sales are in recession, the same thing does not apply to the prices.
The year 2021 through 2022 held a record for home sales. Now, things are going back to pre-pandemic times, when people were buying homes at a normal level.
Will Home Prices Go Down?
With the surge of prices in the housing market, people holding off may wonder when matters will change. Will the prices go down in the year to follow?
According to experts, that is not very likely. Experts predict that while prices will grow 4% slower than usual in 2023, they won’t go any lower. Interest rates for mortgages are also expected to grow in the following year, which may significantly impact home sales.
To cope with the high home prices, people are looking into smaller markets. The farther they are from the bigger cities or popular states, the lower the prices would be.
People would be much more likely to find cheap houses for sale in Texas than in Florida or California.
There is no saying what this trend will bring. As more and more people are looking into smaller towns, the process may begin to increase in those areas as well.
While it may take a couple of years, a home purchase from the small market may turn out to be a good real estate investment.
The Bottom Line
Right now, we are in a seller’s market, where the demand is higher than the supply. Houses sell quickly, and for a high price.
That demand is slowly going down, but prices are expected to remain high in the following year.