Affordability seen as biggest challenge in 2023
Roseville, Calif.- I expect affordability to be the biggest challenge for homebuyers in 2023. Even small price and interest rate declines may not create buyer purchasing power. At the same time, homeowners considering selling may wait to list. Many have already locked in lower mortgage rates, with little to no incentive to sell and buy again until rates are more favorable.
At the same time, we are seeing growing confidence in the housing market. A share of respondents in a Fannie Mae survey said now is a good time to buy a home. This was still low, at just 21%, but it was up from 16% in October and November. The share of consumers who said they were concerned about losing their jobs in the next 12 months dropped from 21 to 17 percent.
Negotiation
The housing market is traditionally slow during the winter season, and with this year's storms, some agents report no activity. Pending home sales, representing signed contracts on existing homes, dropped in November, suggesting that closed sales in January will also be down.
For the sellers currently on the market, negotiation is the name of the game. According to Redfin, more than 40 percent of sellers made concessions to get into a contract with a buyer. That's up from just over 30% in both the previous quarter and the fourth quarter of 2021 and is higher than the previous high of 40.8%, notched during the three months ending July 2020, at the start of the Covid pandemic. and is higher than the previous high of 40.8%, notched during the three months ending July 2020, at the start of the Covid pandemic.
I believe 2023 will be a good year for our housing market but it looks like a cold winter.