Have you ever noticed that real estate market trends are a popular discussion in many different forums? Why is this? Well, people are so fascinated with the housing market for several reasons. The first one is that it tends to be a marker of how well (or not) the economy is doing. Since real estate tends to be very locally driven, the going price for a home could signal a booming or downturn economic area. The other main reason is people are always moving. Everyone knows someone who is either looking for a home or selling a home. This makes it an easy topic of discussion when you need to have those “small talk” moments with someone.

The issue with predictions is that it is just that, a prediction. Many experts got it wrong during the pandemic and continue to struggle with what will happen in real estate. However, there are certain things we know. People want homes, and people’s lives are constantly changing. We also know that interest rates are changing. Here are some things that could be predicted based on those factors alone.

Will Interest Rate Adjustments Continue?

The Federal Reserve has been actively working to curb inflation for the past two years. This has been done primarily by adjusting the federal funds rate. The Federal Reserve has eight meetings each year, and adjustments are made in these meetings. The change they make sets a precedent for mortgage rates, as this is the percentage rate that banks charge one another for lending money. This rate is then passed onto potential home buyers hoping to secure a mortgage. The current Federal Funds Rate is 4.58%. In 2020, this rate was 0.00%, so you can see that anyone buying a home right now will pay more for their monthly mortgage.

Several things could alter the course of the mortgage interest rates.

  1. Inflation will continue to remain at the current high rate. If this happens, the Federal Reserve will have no choice except to continue increasing the interest rate, as this is really the only tool they have to keep inflation in check.

  2. If inflation begins to normalize or even come down a bit, then interest rates will stabilize as well. It is unlikely they will decrease significantly, but there may be some relief for those looking to purchase a home.

  3. The third option is one that no one really wants to think about, a Recession. This could happen if the inflation rate remains high and consumer spending dips tremendously. If a recession were to happen, interest rates would likely fall.

Is the Housing Market still “Hot”?

The answer to this question is, “it depends.” In the past few years, almost every area of the United States (and the world) was seeing a boom in the housing market. Houses were selling so fast that many buyers were beyond frustrated with trying to land a home. If they were lucky enough to land one, the closing process took weeks as every title company struggled to keep up with the demand. 

In 2023, some select areas will continue to see that trend as available inventory may remain low, and buyers are still looking for a home. However, most of the country will see a slow start to the 2023 home sales. The rising interest rates are causing some buyers to wait it out. As interest rates stabilize or decrease, they will get more “house” for their money. This could cause homes to stay on the market longer, but it all depends on what price range you are selling at, what the demand is like in your area, and a host of other factors. 

How will Housing Prices Change”?

Three factors determine the monthly mortgage payment when purchasing a home: the current interest rate, the loan term, and the amount financed. Home prices have soared beyond any predictions since 2020. As life returns to normal, those prices will likely not change much. The good news is that the price of a home will not increase significantly. The downside of this is that home sales have slowed down, primarily due to rising interest rates. If you are selling a home, this means you may not get as much as you anticipated, as buyers won’t be banging down the door. Another note is that the closing process may be faster as Omaha title companies may have more bandwidth to expedite things. The bottom line with real estate is that you must do what is best for you. Yes, interest rates may be higher now, but you have thirty years to refinance that mortgage. If you have decided to buy or sell, then make that move. When you are ready, having a good title company like  Trustworthy Title will ensure you have the best closing process. Contact them when you are ready to make your next move.