If you’re thinking about buying a home in 2023, congratulations! Owning a home is the first, most important step in building generational wealth and financial stability for your family.
But owning a home in this housing market and economy presents unique challenges for which you should be prepared. Even now, the market is still more expensive as a result of many factors - but the trends may be changing soon.
A 5-year prediction compiled in late January by U.S. News & World Report (USN&WR) states that, “Given the rapid rise in mortgage rates and the related decline in affordability in 2022… home values would need to adjust accordingly” in 2023, predicting that they will fall by around 5%. If the numbers decline faster, then home prices might stagnate instead of fall.
In another prediction from December 2022, uncertainty was still the name of the game (even wondering if a crash might’ve been coming; however, USN&WR reported that a crash was unlikely). The models anticipate that as long as mortgage rates are high, home sales will likely stay on the low end because potential home sellers might stay in their homes to keep their nice, cozy low rate (under 5%) from the pre-pandemic era. They also anticipate that “Local markets… will be more likely to see price declines of 10% or more.” To boot, homebuying seasons still aren’t back to normal after COVID, so you might be equally likely to find the perfect home in spring as in winter.
What does all of this mean for the average homebuyer? That you’ve gotta be ready for anything. Here’s a few things you can do to get ready for home buying in an uncertain 2023 market:
Before you ever do a tour, figure out what you want in a house. This is the fun bit: figure out how many bedrooms, how many baths, finished basement, central air, ideal locations, the importance of being in a good school district, all of that.
Then the less-fun bit: put priorities on every single feature you want. A Cinderella house that matches all of your desires AND your budget is extremely hard to find, so know which of the features are must-haves and which ones aren’t quite as important - or can be renovated into the house in the future.
Check your credit score, analyze your income and expenses, and use that information to figure out how much you should spend on a monthly payment and what home price you can afford. (The preapproval process, available here, can also help you figure out what you can afford - see the next section for more details!)
And when you find out your budget, STICK TO IT. Unlike the buyers on HGTV, an extra $20,000 above your budget will be very hard to handle. Going outside of your budget will make it harder for a bank to justify loaning to you, and if the market goes down, your mortgage might end up under water - your house might be worth less than what you loaned from the bank, but you’re still stuck with those high monthly payments.
Getting pre-approved for a home loan is an enormously beneficial step for buying a home You’ll save yourself time, you’ll have better bargaining power with lenders and banks, you'll reduce the risk for lenders who want to loan to you, and you'll have a less painful closing period.
If you want to start the pre-approval process, talk to Northwest Mortgage! We can help you get started on the journey to owning your own home.
This part isn’t rocket science: save as much as you can for your down payment. While 15-20% might not be feasible for some incomes, at least 10% down is usually required for a standard fixed-rate mortgage. Not sure what a fixed-rate mortgage is? Learn more about common mortgage types here.
With some loans, like FHA loans or loans for first-time home buyers, the down payment can be as little as 3.5%. That doesn’t mean you can’t put more down. Putting more down will get you a better rate and save you money on interest in the long run.
Can you find a house without an agent? Yes. Will you have a much harder time of it? Absolutely. Real estate agents have insider knowledge about market trends (buyer’s vs. seller’s markets) and which houses are going to go on the market and when. They bring all of that to bear for their clients.
Even if you’re not planning on buying until the end of the year, it’s a great idea to find your agent before you really need them. So ask your friends who have recently bought houses if they have any agents they can recommend!
If you’re ready and looking to finance your home, contact us! Whether it’s your first or your fifth, we can help you get the loan you need and find the perfect home for you and your family.
Mark Klein- 132598
NW Mortgage- 128113