If you’re planning to buy a home this year, you likely know you won’t be dealing with typical circumstances. The real estate market is still recovering from the pandemic and the ensuing financial fallout. While the uneasy market conditions that characterized the last two years are beginning to settle down, the market is still stabilizing.
Here’s what to expect when buying a home this year, and how to make the most out of the current market conditions.
Flattening home prices
Home prices shot up by 18.2% year-over-year in 2021, and then a generous 9.6% in 2022. The National Association of Realtors (NAR) predicts median existing home prices will inch up just 0.3%, and new homes will rise by 1.3% in 2023. This is fabulous news for buyers who were looking at inflated prices the last two years.
Stabilizing mortgage rates
Mortgage rates more than doubled in 2022, from approximately 3% to more than 6%, further driving up the price of buying and owning a home. In contrast, the 30-year fixed mortgage is expected to average between 5.2% and 6.8% in 2023, according to recent predictions by Fannie Mae, Freddie Mac, the Mortgage Bankers Association, and the NAR.
More negotiating room for buyers
The homebuying process has recently been characterized by fierce bidding wars, leaving little-to-no room for buyers to negotiate. That will change with the supply of available houses on the market creeping closer to matching the demand. Buyers will have more negotiating power and be able to stand firm on their personal preferences, like home inspections and a lower price.
Tips for buying a house in 2023
If you plan to buy a new house this year, here’s how you can prepare for and ensure a smooth, successful process:
– Get your finances in order. Study your finances for a few months if you can. How much money do you have saved for a down payment? What monthly payment can you afford? Ask these questions before getting started to set your goals and expectations. Notre Dame FCU Member-Owners can contact our Financial Physicians at 800-522-6611 and run through a quick financial check-up to get started.
– Boost your credit score. The higher the credit score, the easier the home lending process will be. Paying down debt, paying your bills on time or early, and lowering your credit utilization in the months leading up to your search will help boost your score. You’ll also want to avoid opening new cards and making large purchases.
– Understand your mortgage options. Depending on your circumstances, you may benefit from a mortgage backed by the Federal Housing Administration (FHA), which only requires a 3.5% down payment, or a VA mortgage, which requires no down payment. Similarly, a 30-year fixed-rate mortgage may be in your best interest, or a 15-year adjustable-rate mortgage (ARM) might be more your speed. Contact the Mortgage Team 844-NDHOME1 to learn about your options and make an informed choice.
– Get your pre-approval before you start your search. This way, you’ll know exactly how much house you can afford, and sellers will regard you as a serious buyer.
– Move quickly when you’ve found a possible yes. The market may be cooling down, but it’s still competitive. If you want to buy a home this year and have your finances worked out before you start shopping, it’s a good idea to make an immediate offer on the home you like.