If You’re in the Market for a New Home, You May Have More Buying Power in 2023
If you’re planning to buy a new home in 2023, the first few months of the new year may present a better than anticipated buyers’ market due to several factors that are not only influencing homebuyers’ financial position, but also easing the inventory constraints we’ve seen in recent years.
Key Market Factors
With recent reports that inflation is easing, extra attention is paid to the Prime Rate, which is determined by the Federal Reserve and more directly impacts variable interest loans and credit cards. Mortgage rates are more influenced by the bond market, mortgage-backed securities, and more specifically, the 10-year Treasury yields. Fixed mortgage rates tend to go in the same direction as Treasury yields.
The good news for potential buyers is that if inflation continues to ease, the 10-year Treasury yield could lower, as it did in mid-December 2022 after November’s encouraging inflation data was released.
Impacts on Inventory
With mortgage rates having risen from historic lows in late 2021 to where they sit now, a stabilization of the homebuying market post-housing frenzy has occurred.
With many buyers being priced out of the market first due to record-high prices and bidding wars, then increasing interest rates, sellers have had to adjust their expectations and, in turn, their asking prices.
There simply are not as many buyers now as there were 12-18 months ago and gone are the days of sight-unseen purchases at well over asking prices due to unprecedented competition among buyers.
How You Can Prepare
There are several ways potential homebuyers can prepare themselves for a smoother homebuying experience in 2023.
First, crunch the numbers to determine what you really can comfortably afford. Find a local mortgage lender that can sit down and help you assess your true buying power and potential assistance programs, and a local realtor who knows the neighborhoods you are interested in When looking at what you can afford, consider not only where rates are today but also add some cushion to your budget in the event rates change while you are home searching. For example, if rates are at six percent when you start the process, consider what your payment would be if they rose to seven percent by the time you close on your mortgage.
Your homebuying team can also help connect you with community organizations and local, state and Federal programs that provide grants and access to additional funds to help cover down payment and closing costs.
For first-time homebuyers, many lenders have programs designed to help you navigate the homebuying experience
Another consideration that could aid your home search success is to determine what you really value in a house. During the pandemic, for example, many people were looking to expand their space, either through buying a larger home or renovations on their current home, as they were generally spending much more time at home.
If your living and work situation allows for size and location options, you can expand your home search area and open up additional options to find a home priced right for your budget.
Wherever you plan to look for a new home, make sure you consult your realtor and lender to develop a solid plan to find and finance your first or next home.
Jeffrey M. Ruben, the President of WSFS Mortgage, joined WSFS through its acquisition of Array Financial, a full-service mortgage banking organization, and Arrow Land Transfer in August 2013. Jeff formed Array and Arrow in 2005, having previously held senior executive roles at financial and legal institutions.
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