Is 2023 a Good Year to Buy a House?
- Jun. 2, 2023
- New American Funding
- Personal Finance
Whether or not 2023 is a good year to buy a house will depend on several factors. You will want to consider your individual circumstances and how you view the advantages and disadvantages of buying a home in the current market. Before buying a house, review useful tips covered in this article and think about who you want on your real estate dream team. Selecting an industry leader, like New American Funding, can help you make more informed decisions on your homebuying journey.
Housing Market Predictions for 2023
Experts like Fannie Mae note that 2023 began stronger than anticipated, but say the strength could waver closer to the end of the year. The demand for affordable housing is greater than the supply, and prices are not likely to drop substantially in the near future. Currently, mortgage rates experienced a slight increase when compared to previous weeks, but rates may decrease over time. Mortgage rates will likely average around 5% for the last quarter of 2023, according to the Mortgage Bankers Association.
Possible Advantages of Buying a Home in 2023
Buying a home in 2023 could have many advantages. Some of these include:
- Creating equity: Creating equity increases the amount of money in your home and allows you to use the accumulated funds down the line.
- Building credit: Taking out a home loan can improve your credit as you make stable and consistent payments.
- Obtaining financial stability: Owning a home offers an elevated level of financial stability because it gives you a substantial financial asset. Homeownership empowers you to take control of your housing situation and focus on building for the future.
- Hedging against inflation: When the economy is uncertain, owning a home allows you to hedge against inflation. As inflation increases, the value of your home generally will, too.
- Long-term growth: Keeping an eye on the future is easier when you own a piece of real estate. Property is one of the best investments you can make for long-term capital growth.
Possible Disadvantages of Buying a Home in 2023
Buying a home is a major commitment and should be viewed holistically. Some possible concerns to keep in mind include:
- Uncertain mortgage rates: Mortgage rates depend on a combination of factors, including inflation and federal policies. The Federal Reserve does not set mortgage rates but can indirectly impact them by increasing or decreasing interest rates while implementing various policy changes.
- Possible recession: The federal government is working to prevent a recession and therefore could potentially increase interest rates. It still remains to be seen whether a recession will occur in late 2023 or not.
- High home prices: Home prices likely will continue to increase because of a shortage of housing. The low supply could result in higher prices.
10 Tips Before Deciding to Buy a Home
When starting the homebuying process, be patient and focus on building a strong foundation before entering into such a big purchase. Work on your personal finances and determine your timeline for buying a home before jumping into the real estate market.
Here are 10 tips to help you as you begin considering your homebuying journey:
- Work on Your Personal Finances
Before buying a home, examine your debt and create a savings plan. Typically keeping your debt-to-income ratio (DTI) below 43% will put you in a competitive position. Your DTI indicates how much you owe versus the amount you earn. Have a clear goal and determine how much you need to save to achieve it. Have a solid understanding of your spending and budgeting to determine your ideal future down payment.
- Determine Your Homebuying Timeline
It can take over six months to find and buy a home. Ensure your timeline considers every step such as selecting a real estate agent, getting preapproved for a mortgage from a reputable lender like New American Funding and actively visiting homes. Typically, you will spend the most time searching for a home. Manage your expectations when it comes to timing to avoid feeling pressured.
- Understand the Local Market
Research neighborhoods and determine what businesses and schools are there. Review how similar homes are priced to understand availability in the market. The best way to understand a neighborhood is to actually visit it.
- Improve Your Credit Score
Having a higher credit score can unlock favorable loan terms and rates. The first step to building your credit is to know your credit score. Request a free credit report from one of the three reporting agencies and craft an action plan that includes consistent monthly payments on credit cards and debt.
Since the pandemic, the conversation around affordability and accessibility has expanded to include first-time homebuyer discount programs and government programs intended to subsidize housing for individuals with low credit. Recently, The White House also announced a budget intended to assist people with low credit as well as first-time homebuyers by expanding and preserving affordable housing.
While it is possible to achieve the dream of homeownership with a low credit score, boosting your score may be able to improve your chances of accessing favorable rates and terms.
- Talk to a Loan Officer
Talk to an experienced Loan Officer to understand your options. Have a list of questions and compare the answers to see what stands out to you.
- Hire a Reliable Agent
New American Funding can recommend experienced agents in your area. Then you can examine a real estate agent’s network, website, and recent sales history to gain a better perspective. Compare the competition to select the agent that best matches your needs.
- Shop Mortgage Lenders
Mortgage lenders will check your credit, so it’s a good idea to shop around for them within a 45-day window because multiple credit checks will typically show up as one during that period. Having an expanded time frame allows you to shop for your lender without substantially impacting your credit.
Depending on eligibility, programs like our Pathway program may be able to help you buy a home without a big down payment. Avoiding a large down payment may allow you to focus on other pressing matters like renovations.
Preapproval can also provide certain benefits. A preapproval letter explores how much you can afford and is typically sent to an underwriter for approval. Preapproval may be worth the additional steps because it can assist with streamlining the homebuying process.
- Learn How to Negotiate
When negotiating, knowledge is power. Have clear communication with your agent and get an inspection if possible. Home inspections can point out necessary repairs and offer room for negotiation when it comes to the price of a house.
- Consider Buying a Small House First
The first house you buy doesn’t need to be the only house you buy. For a first-time homebuyer, purchasing a smaller home often leaves room in your budget for repairs and renovations. Small homes still create equity and can be used as a useful stepping stone to a larger purchase down the line. The process of comfortably building wealth and equity may take years so consider buying a larger home like a marathon instead of a sprint. Knowing all your loan options as a first-time homebuyer will help you make informed choices including how you could even potentially use your 401k to make a down payment.
- Be Patient with the Process
Buying a home will likely take some time. In some cases, buying a home can take a full year or more. Take your time to avoid buyer’s remorse. Managing your expectation of the process can help you stress less overall.
Buying in 2023: To Buy or Not to Buy
Whether or not you choose to buy a home in 2023 will likely come down to your unique financial situation, how you weigh the advantages and disadvantages in the current real estate market, and your future financial expectations. Weigh your options to decide whether you should put together a top homebuying team in 2023.
Is it the Right Time to Buy a House?
This year could be the right time for buyers depending on your financial situation and how you view the advantages and disadvantages of buying in the current market.
What is the Future of Housing?
The future of housing depends on variables ranging from supply and demand to recession concerns and interest rates. Keeping an eye on patterns and trends will not allow you to predict the future of housing, but it may you better insight into the fluctuations of the housing market.
Are House Prices Going Down?
Housing prices will likely closely follow mortgage rates and other factors such as inflation. Historically, housing prices tend to increase.