You’re preparing to make a real estate move in the next few months, but you’re not sure what to expect. Whether you’re planning to buy a home, sell a home or both, you’re hoping to figure out what the market might look like by the end of the summer.
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Things certainly have changed a lot in the past year. Mortgage rates have surged, median home sale prices are down and fewer homes are being sold.
Specifically, the average 30-year fixed rate mortgage interest rate was 4.42% as of March 24, 2022. One year later, the average 30-year fixed rate mortgage interest rate was 6.42% — a massive 2% increase.
As of February 2023, the median home sale price was down 1.2% year over year, according to Redfin. A more notable decline: The number of homes sold decreased by 22.3% during this same time period.
“Buyers and sellers will be looking at a very different real estate market over the next few months,” said Maureen McDermut, a Realtor with Sotheby’s International in Montecito, California. “There are many reasons why the market will fluctuate tremendously over the coming months.”
She shared three predictions for the housing market from now until the end of summer.
The number of buyers will decrease
“The continuing effort by the Federal Reserve to raise interest rates to curb inflation will scare many buyers out of the market,” she said. “The vast majority of buyers need to take out a mortgage; and, with interest rates on the rise again, more will opt to remain in their current situation.”
Sellers Will Have To Put In More Effort
“In order to sell a home for top dollar in 2023, those wishing to sell their homes are going to have to invest in marketing their homes,” McDermut said. “In the white-hot market of 2021, sellers have it easy.”
During that time, he said, sellers sold their homes above asking prices without putting much effort into the properties.
“Many would not update their homes, knowing that multiple offers would come in as many buyers were eager to move,” she said. “Now, with less buyers on the market, those who want to sell their homes need to invest in updates and marketing.”
Normalcy Is on the Horizon
“By the end of summer, the market will return to normal,” McDermut said. “The Federal Reserve will slow their interest rate hikes, as Jerome Powell has indicated they want to lower interest rates at the earliest prudent time.”
If this happened, she said, it would allow more buyers to enter the market and entice more sellers to list their homes.
Rena Kliot, broker and founder of Pulse International Realty, which has offices in both Miami and New York City, also shared her predictions for the housing market by the end of summer. Here’s what she had to say.
Buyers Will Gain Negotiating Power
She said bidding wars have faded and buyers now have negotiating power. While interest rates have surged recently, she said they seem to be returning to a more palatable place.
“We have seen rates at 7% during healthy markets,” she said. “Some may just feel a little sour about missing the boat on the very attractive rates at 3% that were offered around the pandemic, but these rates are certainly not unfamiliar territory.”
Home Prices Will Decline
“We are likely going to see some distressed sales, and sellers will need to become more realistic,” Kliot said. “The spike in home prices is not sustainable and was in direct correlation to the pandemic.”
In many cases, she said, buyers were willing to pay more for homes because they were making desperate and emotional purchases.
A Housing Market Crash Won’t Happen
“I do not foresee a double-digit slowdown and, from what I’ve read, neither do most economists,” Kliot said. “Clearly, we will see a slowdown; however, any correction will be modest, especially in comparison to the declines experienced during the Great Recession we lived through.”
Ultimately, she said, she doesn’t expect the real estate market as a whole to suffer the disastrous consequences experienced during the great recession.
“One significant variable between now and then is that homeowners for the most part are financially stronger and more capable of maintaining their homes today than they were then,” he said.
She said the mortgage industry has implemented more stringent guidelines for borrowers since the 2008 housing crisis.
“The majority who were able to lock in rates below 5% and met all necessary approval criteria will not suffer foreclosures,” she said. “Very different from the process 15 years ago.”
Additionally, she said, builders learned key lessons from the recession.
“Builders recall the challenges of that period in time all too well and tend to air on the side of caution, as it keeps the pace of construction,” he said. “That helps to balance supply and demand.”
While it’s impossible to know for sure what the housing market will look like by the end of summer 2023, it appears that a buyer’s market is on the horizon. This is great news if you’re looking to purchase a home in the next few months.
However, if you’re planning to sell your home, you’ll want to manage your expectations. The bidding wars — and subsequent sky-high sale prices — and doing the minimum to get your home ready for the market are likely now a thing of the past.
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This article originally appeared on GOBankingRates.com: What Will the Housing Market Look Like by End of Summer 2023?