With less than 90 days left in 2022, leading mortgage lenders, real estate companies, housing gurus, etc., have gone into overdrive with predictions about what will happen to the US real estate market in 2023.
What's up ahead for the housing market in Pennsylvania – and here in Pittsburgh – in 2023? Here are a few predictions.
We've been closely following these forecasts at HomeBuyers of Pittsburgh, and below are a few that we think will apply to the Pennsylvania real estate market in 2023.
Double Digit Home Price Increases Will End
The biggest development in the U.S. real estate market in 2022 was the pandemic housing boom slowing down.
The boom was characterized by a rise in homeowner demand that overwhelmed supply, sparked heated bidding wars, and resulted in a 40%+ increase in property prices over the past two years.
In 2023, many real estate experts believe that the downturn will cause housing inflation to drop back to pre-pandemic levels of 5% or less. We also foresee this happening because Pennsylvania tends to follow national real estate trends.
In a study titled "Housing Downturn: Further to Fall," recently released by investment banking giant Goldman Sachs, they predict that home price growth may fully freeze, averaging 0% in 2023, and then pick up to 3.5% in 2024 and 3.8% in 2025.
They're on par with other forecasters, including Fannie Mae, the Mortgage Bankers Association, CoreLogic, Zillow, and Freddie Mac, who also expect that home prices will climb by just a few percentage points in 2023.
This has already happened, as there has been a decline in home sales over the past few months.
Redfin reports an 11.9% decrease in the number of properties sold in Pennsylvania in September 2022.
High property prices and rising mortgage rates have made purchasing a house more expensive, which is why home sales have slowed down.
Many prospective home buyers were driven out of the market by soaring mortgage rates, which saw the average 30-year fixed rate jump from 3.1% to 5.7%+ this year.
These buyers are likely to stay away from the market as the Federal Reserve reiterates its intention to continue raising interest rates as long as inflation remains high.
Therefore, it is likely that the decline in home sales will continue well into 2023.
Before 2022 is up, Goldman forecasted a 22% reduction in new home sales and a 17% decline in existing home sales. They also predicted even worse drops in 2023, estimating an additional 8% drop in sales of new homes and a 14% drop in those of existing homes.
However, they anticipate a significant home market recovery in 2024.
The Struggle for Affordable Housing Will Continue
The housing market has changed over the past two years from being affordable to expensive, and property prices are currently at record highs.
With most real estate experts predicting home values will stop skyrocketing in 2023 and not drop due to inflation and a limited home inventory, property prices will remain high.
We think it will take several months to a year to offset the insane increase in real estate values that occurred during the COVID-19 pandemic.
So, millions of individuals will continue to be unable to purchase a home because of the steep prices and high loan rates, especially first-time purchasers who don't have an existing home they can sell and use the proceeds to buy a new one.
Pennsylvania's predicted median home price by the end of 2023 is $287,950, which is quite affordable compared to other US states.
If home affordability is a concern for you, the following advice can help you find the perfect house for you at the right price in 2023.
Obtain a mortgage pre-approval. This will give you confirmation that a lender is willing to finance your home purchase. It will also place you in a significantly stronger bargaining position by demonstrating to home sellers that you can support your offer with actual money.
Have a home purchase budget and stick to it. I know how discouraging it can be to search for a residence only to find that all the ones you like are out of your financial reach.
However, the joy of homeownership can quickly turn to misery if you buy a home you cannot afford.
So, you must exercise patience when looking for a property because it could take some time before you locate one that fits your needs and price range. When setting a budget, make sure your mortgage payments are less than 25% of your net income.
Therefore, it is advisable that you work with a real estate expert (like us!) who is aware of the market trends to help you navigate its complexities.
The Rental Market Will Stay Robust in 2023, Which Could Increase the Number of First-Time Homebuyers
A growing number of people are becoming renters, maybe because they lack the funds to buy a home or because they prefer the flexibility that renting offers.
I anticipate high rental rates in 2023 due to the rising demand for rental units and inflation.
Many people, especially members of Gen Z and millennials, may begin to seriously explore becoming homeowners in order to avoid hefty rental costs.
Almost a quarter of Pennsylvania's residents are millennials. Real estate experts already predict that as this generation enters its thirties, the crucial first-time home-buying years, it will have a significant impact on the housing market in 2023 and beyond.
Homebuyers of Pittsburgh: #1 Professional Home Buyer in Pittsburgh
It's confusing to be in the housing market right now because it's changing. Leaning on a reputable real estate expert to guide you in making informed decisions based on current market trends is the best strategy for navigating this shift.
Whether you're buying or selling, Homebuyers of Pittsburgh can be your trusted advisor on the Pennsylvania real estate market. We have over ten years of real estate experience, and we're ready to work with you to help find your dream home or quickly sell your property!
To learn more about how we can help you achieve your real estate goals in Pennsylvania, please contact us at 412-444-8914 or info [@] urbanpgh.com today.