Is 2023 a Good Year to Buy a Home?

It’s a strange time to be in the market for a new home. On the heels of a pandemic-fuelled buying frenzy and the fastest rise in interest rates in decades, it’s hard for homebuyers to know what to plan for in 2023. 

While our crystal ball is in the shop, we asked the following experts in the housing industry to predict what will happen to the housing market over the next year:

• Jeff Ostrowski, Bankrate’s Senior Mortgage Reporter
• Jason Gelios, a realtor in Southeast Michigan
• Danny Perez, Managing Director of M&D Real Estate
• Mike Hardy, Managing Partner at Churchill Mortgage
• Bill Gassett, a RE/MAX executive realty agent based in Massachusetts

Where are home prices headed in 2023?

Even though interest rates cooled a red-hot housing market last year, home prices still hit a record high. According to the National Association of Realtors (NAR), the median home price in 2022 was $386,300, up 10.2% from 2021. That was the highest price since the NAR started tracking the data in 1999. 

But there are some signs that prices are coming down. Existing-home sales dropped in the last 11 months of 2022 and were down 34% in December 2022 from the previous year. Redfin even predicted that median home prices would drop by 4% in 2023. That would be the first time that’s happened since 2012. 

Most experts we spoke with agreed that buyers should be cautiously optimistic about home prices in 2023.

Location, location, location

While experts expect home prices to come down across the country on average, each market tells a different story. 

“Home prices have peaked nationally and are retreating a bit,” said Bankrate’s Senior Mortgage Reporter, Jeff Ostrowski. 

“During the pandemic boom, prices were soaring everywhere, both in tech hubs and in the Rust Belt. Now, home values are falling in Northern California, Seattle and Denver, but they’re still rising in Florida and parts of the Midwest.” 

Verdict: It depends on the location, but home prices should decline slightly in 2023.

Will mortgage rates continue to rise in 2023?

The average 30-year fixed-mortgage rate currently sits at 6.72%. That’s down from highs of 7.24% in November 2022, but still far ahead of the record low of 2.65% in 2021. 

None of the experts we interviewed predicted a dramatic change in interest rates in 2023, and all of them said it depends on whether or not inflation starts to cool.

“For interest rates, we expect them to stabilize around where we are right now for the year,” said Danny Perez, Managing Director of M&D Real Estate. “It has moderated as inflation has begun to come down. I don’t expect interest rates to go much lower this year, but to probably keep bouncing around between 6 and 7%.”

Mike Hardy, Managing Partner at Churchill Mortgage, also predicted rates to hold steady in 2023.

“We have mortgage rates in this 6-7% range because inflation is not yet contained. As long as we have ongoing inflation concerns, rates will stay in this range,” Hardy said. “I expect the Fed to continue to tighten the federal funds and discount rate until inflation is trending down. When we see this trend, we will see mortgage rates follow suit.”

Verdict: Rates will stay between 6 and 7% in 2023.  

Will 2023 be a good year to buy a house?

While house prices should come down in 2023, high mortgage rates will still make buying a home difficult for many people. 

“For homebuyers, it’s a mix of good and bad,” said Ostrowski. “On one hand, the pandemic-driven frenzy of bidding wars is over. So buyers can relax a little, take their time and feel confident that they don’t have to bid $50,000 over the asking price to even have a chance. On the other, home prices remain high, and mortgage rates are still up there, so affordability is a challenge.”

Because the housing market looks a lot different depending on where you live, deciding whether to move may ultimately depend on where you plan on going. 

“It will matter less if you are buying and selling in the same market,” said Bill Gassett, a RE/MAX executive realty agent based in Massachusetts. “However, if you are going from an area that favors buyers to one that favors sellers, it might not make sense to make a move.”

“The biggest bear in the room is inventory,” Perez told us. “We’re beginning to see sellers start to come to the market and listings pick up somewhat already this year. But Dallas-Fort Worth had a decline of 38% in new home construction. That’s the biggest decline since 2009, percentage-wise. We still have an inventory problem.”

That said, it could be an excellent time to be aggressive if you find a house you love — even if you can’t quite afford the list price. 

“What we are telling all of our buyers right now is this: Make offers. Make offers,” said The owners are ready for offers — they are in seller fatigue. Nothing is selling for list price, so get out there and make those offers and see what kind of traction you can get.”

Verdict: You can find good deals in some markets, but high mortgage rates still make affordability an issue.

The bottom line

Heading into 2023, we’re looking at one of the most uncertain housing markets in a decade. While home prices are actually expected to come down, higher interest rates will offset these savings for most people.

As always, keep a close eye on the locations you’re considering moving to. Prices have dropped the most in pandemic boomtowns like San Francisco, Seattle, and Phoenix, while cities like Kansas City, Indianapolis, Virginia Beach, and Louisville have held steady.