The Short Answer
Are you on the fence about selling your home this year? If you’re asking yourself “Should I sell my house in 2023?”, we’re here to help. Whether you’re going to use a real estate agent or are looking at selling it yourself, there are no hard and fast rules for selling a home, and there are different schools of thought on this topic. 2022 saw the housing market in the US behaving unpredictably, thanks to the pandemic and the subsequent market crashes and recoveries.
Which begs the question, should you jump on board while the market is hot?
Table of Contents
Top 4 Reasons For Selling A Home
1. Changing needs
Life isn’t linear and people’s needs change frequently, this is one of the main reasons people may begin to ask themselves “Should I sell my house?”. If a family is expanding, they may need a bigger home with extra bedrooms, or the neighborhood may have changed and become to busy or too quiet for the family’s needs. As a family’s needs change, this can cause them to outgrow their current home and go in search of a new one.
2. Financial changes
If a person’s financial situation changes, this is a huge driving factor as to why they may need to sell their home. For example, if someone loses their job and can no longer pay the mortgage, or if the owner has built up home equity and wants to use that for a down payment on another property.
3. Relocation
Another reason for selling a house is when people need to relocate. Whether this is due to a job change, for kids’ schools or other reasons, people generally need to relocate at some point in their lives. As such, this is one of the most common reasons for selling a house.
4. Lifecycle changes
As people go into different phases of their lives, their housing needs change. Whether this means upsizing or downsizing, a change in lifecycle often leads to the need for a different house. These changes can include kids moving out, relationship changes, retirement and so on.
Top 4 Reasons For Keeping A Home
1. Appreciating asset
The longer you continue to invest in a house, the greater the return you will see on your investment. Which means that the more home equity that has been built up, and the more appreciation that the property has had, the bigger the profit a homeowner will make once they sell the house. Property values have notoriously gone up over the years, which means that people often keep their properties for over 10 years.
2. Building equity
Homeowners that continue to build home equity will do well to keep their home over many years as property is one of the few assets that generally appreciates over time. Building equity means that you’re owning more and more of the property, as you pay off the principal amount of your mortgage. Until eventually you own the entire property free and clear.
3. Tax benefits
Owning a home comes with tax benefits which range from property tax deductions to capital gains exclusions and more. These tax benefits can make it worthwhile for a person to keep their property longer, instead of selling it.
4. Emotional attachment
Many people keep their homes due to the emotional attachment that they have with it. After living in a home for many years, some families struggle to part with the home as they have created fond memories in it, which they don’t want to lose.
House Price Growth
With escalating mortgage interest rates and home sales slowing down, potential buyers all over the country are feeling uncertain about which direction the housing market will head in 2023. Thanks to the current rise in mortgage interest rates, home price growth has slowed down from the frantic pace it had been increasing for the last 2 years. While home price growth is slowing, it certainly hasn’t hit a full decline yet in many areas, due to limited housing inventory.
It’s uncertain where housing prices will end up in 2023, and experts have mixed opinions on this. According to Hannah Jones, economic data analyst at Realtor.com, “[H]ome prices remained 8.1% higher than the previous year which, coupled with mortgage rates up more than 250 basis points in the same time period, meant that potential buyers were still positioned to pay much more for a home than a year prior,”.
In January 2023, the median existing-home sales price was $359,000, which was an increase of 1.3% year-on-year, according to the National Association of Realtors (NAR). Price growth has slowly been waning, with the difference in prices between December 2022 and January 2023 indicating a slowdown already.
Why Are House Prices So High?
House prices are impacted by a variety of factors including inflation, housing inventory and buyer demand. The age-old supply and demand impact rings true for the housing market as well, and this is essentially the cause of housing prices going up or down. Supply and demand are impacted by the overall economy and other factors.
Over the last few years, the main factors that have driven home price increases are inflation, a huge demand for housing thanks to low mortgage interest rates, and a housing inventory that can’t match the demand.
Between the first quarter of 2021 and the first quarter of 2022, the median home price in the US housing market rose by $53,800, according to Redfin. However, mortgage rates then began to rise as the Federal Reserve drove interest rates up. This has led to a slowing of the rapid rise in home prices over the last 2 years, which is likely to lead to a cooling of the housing market this year and, in turn, home price growth stabilizing.
“As inflation has been increasing, it means that anybody who’s lending money knows that they’re not going to really get the true value back unless they charge a higher [mortgage] rate because the money in the future is not going to be worth as much as money today when you have inflation,” said Daryl Fairweather, chief economist for Redfin.
According to Zillow, affordability in the housing market is expected to improve slightly in 2023, however inventory may still be on the lower side and this would result in continued high monthly mortgage payment. This means that the market may start levelling out but isn’t likely to return to pre-pandemic levels in 2023.
Fannie Mae forecasts a subdued housing market in 2023, with home sales remaining low but increasing more than previous predictions have shown. According to Norada Real Estate Investments, by January 2024, house prices are expected to drop the most in these areas:
- Lake Charles, LA
- Dickinson, ND
- Hobbs, NM
- Houma, LA
- DeRidder, LA
There are different schools of thought on the housing market for next year however, and the experts cannot be 100% sure of the future of home prices in 2023.
Will Home Prices Drop in 2023?
Home prices have already begun their descent so far in 2023, and are likely to continue this path, according to the experts. Most experts agree that the housing market is likely to correct itself this year, but with a slow decline instead of a sharp drop-off. There is a forecasted 5% drop across the board for home prices in 2023, according to ATTOM Data.
Local housing market forecasts may differ though, with some markets expecting prices to continue rising, and some expecting larger declines of up to 10%. “Some of the more expensive markets will potentially see larger declines. Limited inventory, strong credit quality among current mortgage holders, and demand from young adults looking to become homeowners should help prevent prices from falling even further,” said Rick Sharga, executive vice president of Market Intelligence for ATTOM Data Solutions.
Home buyers can look forward to some positive news about the 2023 real estate market. “While sales are still depressed from a year ago, this shows another crack in the housing market that should benefit potential homebuyers, especially when mortgage rates drop,” said Robert Frick, corporate economist at Navy Federal Credit Union.
For 2 years the US has experienced a seller’s market, however the experts are predicting that 2023 will be a balanced market that doesn’t favor buyers or sellers largely. Higher interest rates are likely to impact home values and pricing, and therefore dampen the ferocious pace at which they were increasing.
Greg McBride, chief financial analyst for Bankrate, says “affordability issues and economic worries will depress home buyer demand, and inventory of homes available for sale will remain limited. So, it’ll continue to be more of a balanced market than tilting one way or the other.”
The market can be unpredictable however, and housing market predictions hinge on various factors. So, these are essentially educated guesses to give people an idea of what could happen in the market. This can change, based on any changes to interest rates, geopolitical issues, overall economic changes and more.
Reasons To Sell Your Home in 2023
The timing of a home sale can be tricky, whether you’re selling with a real estate agent or doing it yourself. There are many factors at play and these can leave home seller’s unsure of when to put their house on the market. Now that we’ve outlined the predictions for the real estate market in 2023, here are some reasons for you to sell your home this year.
Home prices may fall
Home prices in 2023 are likely to stabilize, according to the experts, and in some areas they may even fall. Which means that sellers should get their properties on the market before this happens. The increase in interest rates will lead to a lower demand from buyers, and house prices will have to fall as the market shifts.
Mortgage rates should stabilize
Mortgage interest rates are likely to stabilize this year, which means that those who are going to sell their home and purchase a new one, aren’t going to be hit with such large rates. If a mortgage rate of 5-6% is within your budget, then selling your home in 2023 is a viable option for you.
Your financial situation has changed
Rather than trying to stick it out until next year and possibly missing mortgage payments, a change in your financial situation, such as losing a job, can mean that you need to sell your house this year. It’s a good idea to sell sooner rather than later, to avoid getting into hot water financially, and having to downsize before your property ends up in foreclosure. Homes are still selling, albeit slower, so you’re likely to sell your home and potentially still make a profit.
The market may change
Sometimes it’s best to go ahead and list your property on the current market, rather than waiting around for the market to become more favorable. This depends on each seller’s unique situation however the current market is regaining some balance and could become a buyers’ market. As such, sellers may want to list their property, either with a real estate agent or on their own, before the market changes and they struggle to find a buyer.
You don’t need to sell fast
Houses are sitting on the market for longer, which means that while sellers may still get a good price for their homes, they may not sell in a hurry. You can consult a local real estate agent to find out how long homes are sitting on the market in your area. Properties are still appreciating in value, so sellers are likely to get a good price on their home, and with buyers still around, even amidst higher interest rates, sellers are likely to find a buyer in time.
Reasons To Wait Until 2024
While there may be some compelling reasons to sell your home in 2023, this is also dependent on your personal circumstances, which may not lend themselves to the current market. Now we’ll outline a few reasons not to sell your home in 2023, and to wait until 2024 rather.
You’re upgrading to a bigger home
Those who are going to sell their home in order to purchase a larger one may want to wait before they do this. The current market doesn’t lend itself to finding affordable deals, as it is still favoring sellers. Along with this, mortgage rates are high so your next mortgage would be larger, which could result in this option becoming unaffordable.
Waiting until next year will allow for mortgage rates to come back down, which could make this a more budget-friendly option. Purchasing a larger home will increase the monthly mortgage payment, doing it when mortgage rates are lower can ease this burden a little.
You purchased or refinanced a home in the last 2 years
If you have purchased or refinanced a home in the last few years, selling your house now won’t be a good idea. Those who purchased homes in the last 2 years were able to secure low mortgage rates (sometimes as little as 3%), but since then rates have doubled. As such, their new monthly mortgage payments would be significantly higher, so it would make financial sense to wait until the rates have come down.
You aren’t in a rush to sell
For those who aren’t in a rush to sell their home, waiting until 2024 or even 2025 may be a better bet as the economists are predicting that the market and inflation will be resolved by then. Housing prices are likely to be rebounding by then, and mortgage rates are forecasted to have dropped. Which means that you could get a good price for your home and receive a better monthly repayment on your new home.
The Bottom Line
The decision of whether to put your home on the market or not shouldn’t be solely based on the housing market in the US right now. You should also consider your local real estate market, which can be slightly different to the countrywide real estate market. Your local market conditions are a large indicator for your selling decision because each area has different trends, for example, in Minnesota moving in the spring is more common and months like February are not a good time to sell a house.
It’s important to consult a local real estate expert, such as a real estate agent, to find out more about your local market and what their predictions may be for 2023 in terms of housing prices. It’s also important to factor in mortgage interest rates, local job growth and your neighborhood’s inventory, before putting your house on the market. At the end of the day though, whether you choose to sell your home with a real estate agent or not, the decision is yours and you should do what’s best for your specific financial needs.