The last few years of the housing market have been anything but predictable with the change in rates and the ongoing bidding wars. As we’re seeing the 2023 home buying season on the horizon, Rockland Trust’s SVP and Director of Residential Lending Bob Driscoll is here to provide five trends he’s been seeing to give you a sense for this year’s market.
The housing market is constantly evolving. At the moment, it still feels unsettled after the rapid change and disruption during the peak COVID years. At a glance, mortgage rates are still fairly high, home prices remain steep (including rentals) and there’s an acute need for more housing inventory. However, Bob feels optimistic that 2023 is a transition year that is going to lead to a more stable, settled market in 2024.
To gauge the current market and where it’s heading, Bob and his team look for “leading indicators” – signals that give housing lenders a good sense of where things stand. For example, the fact that Bob’s team is generating more mortgage pre-approvals and credit applications than this time last year points toward a healthier market this spring, summer and beyond.
But what exactly does a healthy housing market look like? Bob reminds us that a healthy market occurs when there’s a relatively even exchange between buyers and sellers, and when first-time homebuyers are able to participate and throw their names (and offers) in the ring. A healthy ratio of first-time home buyers is when they make up approximately 40% of the market.”
It is no secret that the Fed is expected to continue to increase rates to curb inflationary pressure. A by-product of this increase should be a decrease in home prices which should correlate in more engagement from first-time home buyers than the Market saw in 2022. Driscoll believes this to be true especially in the Northeast where rental prices continue to soar. Instead of waving caution flags, he’s now encouraging first-time home buyers to be open to housing opportunities, assuming they are in the right financial position to do so. As always, he reminds everyone to think through their motivation to buy, instead of bending to societal peer pressure or other factors. Although it is important for first-time buyers to understand the economic conditions, it is more important for them to make sure the home matches their current needs and the way they expect to live for the next 3-5 years.
Support for First-Generation Homebuyers
Compared to where the market was a few years ago, the dynamic is beginning to shift between buyers and sellers. Inventory remains low, which is not allowing the pendulum to swing to the buyers as quickly as one would have thought. We are certainly seeing homes staying on the market for longer periods of time and seeing less houses going for far over their asking prices. As the market cools down, sellers are no longer completely dictating the terms. Instead of having to commit to homes on the spot before they’re snatched off the market, buyers now have a little more breathing room to check out the neighborhood, conduct home inspections and feel committed to their decision.
Making the Most of a Hot Housing Market
Housing is personal. Our homes are where we spend so much of our time outside of work (or at work, if you have a hybrid or remote job), as well as where we spend quality time with our loved ones. Therefore, there are a lot of emotions wrapped up into the process of buying or selling a home. A few years ago, sellers had the upper hand and many prospective buyers were feeling fatigued and dejected by the market. Now, buyers are slightly more hopeful and thinking, “It’s a better market than it was, but how much more will prices drop?” Buyers are primarily concerned with having mortgage payments that feel reasonable to them.
Sellers are in a similar position of being on the fence. Many are wondering if and when mortgage rates will drop. Sellers who locked in lower mortgage rates are understandably reticent about selling and purchasing a different home with a higher rate. Sellers also want to make sure they’re selling their homes for the highest possible value, leading to homes being listed for longer periods before sellers are willing to drop their prices.
There are also a lot of people who are perfectly content staying in their current homes, especially those who embarked on home improvement projects during COVID are now feeling settled and comfortable in their space. Some of these home upgrades, like pools, don’t always translate into higher home values, which is on the minds of these folks.
The housing market doesn’t operate in a bubble. Prices of homes, mortgage interest rates, inventory, etc., are all influenced by outside forces like cultural shifts, governmental policies, the economy and more. Mortgage lenders like Bob look at what’s happening in the world around them to predict how the housing market might be impacted. For example, following trends in housing development, urban planning, community infrastructure and remote work can provide insights into the future of the housing market.
If you’re looking to buy or sell a home in 2023, or simply want to chat with an expert about how trends in the housing market might affect your short- or long-term plans, reach out to our experienced team of residential lenders at Rockland Trust or drop by your local branch today.
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