Housing Market Trends February 2023 | Residential Snapshot

Last Updated on February 1, 2023 by Luke Feldbrugge

The housing market trends for February 2023 indicate that this year is going to be a better year for buyers than the previous year. That wouldn’t be hard. During the pandemic we saw skyrocketing home price increases, bidding wars and offers on houses that seemed hard to believe. We need to calm down a bit and get smart about the real estate market. That is, if, and only if, the interest rates cut us some slack.

Last year’s incredible doubling of interest rates still has buyers a little shaky. No one has ever seen mortgage rates spike so quickly, and it pushed a lot of buyers to the sidelines just as they were considering taking a fresh look at their local housing market. If you are in this holding pattern, waiting to see what the rates are going to do, it will be a good thing to take some time to learn about the opportunities out there and how you can take advantage of them.

Average Rate Spread – Lessen the Panic

Interest rates are at an all time high for a lot of reasons, but primarily it’s because the Federal Reserve raised the interest rate on its 10-Year Treasury Note in response to high inflation. That typically creates higher rates on the mortgage side. However, the average rate spread between the Fed’s rate and mortgage interest rates is usually around 1.79%, meaning mortgage rates are that much higher than the Fed. Now, however, the spread is 2.7%–a whole point higher than the twenty-year average. Consequently, we get higher mortgage rates, but they are even higher than they should be by a full point. If we were experiencing an average spread, current interest rates for single-family homes would be, and should be, 5.28%.

And they are not.

That makes us wonder what causes the spread on the Fed to be so high. The big reason, it turns out, is that panic and uncertainty are the primary causes of a larger than normal spread. In a word: volatility. You can say what you want about last year’s real estate markets, but volatility sort of sums it up.

If you are looking for good news, the panic is starting to subside. At least that’s the sense in the market today. At the end of 2020 we started seeing experts and the Fed saying that “maybe the peak of inflation is behind us.” That means, perhaps, the Fed will go at a slower pace and stop increasing its rate. That could go a long way toward lowering interest rates.

2022 spread between 10 year treasury yield mortgage rates 50 year average one percent difference Freddie Mac CNBC data

Housing Market Trends February Opportunities

The watchword for 2023 seems to be opportunity. Housing inventory is up. Interest rates for the U.S. housing market have stabilized (we think). The experts are saying this is an opportunity to get back in the market, even if we are headed into a recession. In particular, Lawrence Yun, Chief Economist for the National Association of Realtors, is optimistic.

two quotes lawrence yun mortgage rates peaked david stevens view market as buying opportunity January 2023

Keep in mind that demand for homes is projected to continue for years, so when they say it’s a window of opportunity, they are projecting a renewed sense of urgency.

Mortgage Alternatives

With interest rates being what they are, some buyers are entertaining alternative means of financing. That means that ARMs (adjustable rate mortgages) and rate buy downs are back on the table as buyers look for any kind of leverage over high mortgage rates.

The ARM is a way to start paying on your mortgage at a lower rate, but the rate could change in the future. These mortgages got a bad reputation during the Great Recession and housing bubble in 2008-2009, but regulations have reduced the danger of these arrangements. They aren’t the risky loans that they once were.

Buy downs are a way to lower your interest rate on your mortgage at closing by paying a point up front. That means paying more money at closing, but in the long run you lower your interest rate–and save more money on your monthly payment over the life of the loan.

quote linda f-hersey real estate news temporary rate buydowns hot trend due to higher costs for loans January 2023

Housing Market Trends February Hot Topic: Home Prices

On the buyers’ side, 2023 looks to have some opportunities. What about the sellers? The one thing that sellers do not want to hear is the housing prices are falling. And yet, that’s what the news media is proclaiming every chance they get. You may not be getting the complete story if you pay too much attention to the news. Here are some facts.

  • In the United States during the pandemic, we had 12% price growth in typical home values. These high prices could not go on forever.
  • As of November 2020, just over 1% of homes have seen a reduction in their price during the past year (but not necessarily their value).

percent share homes with prices reduced Jan 2021 Nov 2022 data source realtor.com January 2023

Have home price decreases hit bottom? There’s every indication that lower prices on homes peaked in August 2020. There continues to be high demand for homes, so sellers don’t need to panic over the value of their homes.

Gather Insight and Assemble Your Team

If you are looking to buy in 2023, there is some prep work you can do before you start your search.

First, take some time to inform yourself about the real estate market. Find out what’s important when you buy, and learn about mortgages. For example, getting pre-approved for a loan can make a dramatic difference in the success of your home search. Do you know how private mortgage insurance affects your mortgage payments? This can increase the amount of your monthly mortgage payment rather significantly, so it’s good to know what it entails and whether you may be on the hook to cover it.

If you are one of our military heroes, the benefits of a VA loan should really be on your radar. Check out our military and VA loan blog posts to find valuable information that explains a lot of the elements of the home search and can be a valuable resource for you.

One thing will be very important to first-time buyers as the year unfolds: the cooperation between your real estate agent and your mortgage lender will be key to finding and affording a new home.

Homes for Heroes Specialists Save You Money

And that’s where Homes for Heroes can really help you in your search. Our real estate and mortgage specialists work very closely together as your Homes for Heroes team that can also include a home inspector and title companies.

This team is committed to serving community heroes – teachers, healthcare professionals, firefighters, EMS workers, law enforcement members, or military members (active, reserve and veterans). That’s why they signed on with us. The up-front help can really make a difference in your hunt. Then at the end of your search, after closing, Homes for Heroes will send you a Hero Rewards check which averages about $3,000.

You should not go into the 2023 real estate market alone. Sign up today and make our local team, your personal team.

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