Q2 2023 Real Estate Trends
The first quarter of 2023 generated concern among real estate gurus due to the combination of rising mortgage interest rates, declining home sales, and ongoing inventory and affordability issues. Understandably so. However, industry insiders suggest that the second quarter of 2023 will be different from typical second quarters in the housing market.
In the past, the second quarter has been the busiest time for the real estate market, with high levels of listings, buyer interest, and home sales, especially during May and June. However, due to the current financial uncertainty, it's difficult to forecast the housing market's future performance. If prompt measures are taken to alleviate fiscal and banking ambiguity, lenders may become more willing to originate mortgage loans, potentially leading to a surge in activity, particularly if mortgage rates decline.
According to Scott Krinsky, a residential-banking attorney and partner at Romer Debbas law firm in New York City, the return to normalcy in the housing market will not be sudden. He notes that a positive sign is that whenever mortgage rates have dropped in the past, there has been an increase in activity from buyers who were previously waiting on the sidelines. This leads to the hope that the housing market has already hit its lowest point in terms of overall activity.
What are the expectations of experts regarding mortgage rates in the second quarter? It's likely that they will remain stable at current levels. According to consensus, the 30-year fixed-rate home loan is projected to average 7.0 percent, whereas the 15-year fixed-rate mortgage loan is anticipated to be 6.0 percent. However, if inflation decreases, and the Federal Reserve stops raising rates, mortgage rates may begin to decline by the end of the quarter, settling in the 6.0 percent range. Other factors besides the Federal Reserve could impact the rates in Q2 as well. If concerns continue to rise in the banking sector, mortgage rates could drop faster than expected. The 30-year fixed mortgage rate is expected to be about 6.2 percent this quarter.
Should mortgage rates stay elevated and buyer interest weaken, there is a general expectation that home prices will soften as the year goes on. Nevertheless, many potential buyers are still unable to afford homes due to high prices, and this trend is not likely to change in the second quarter. The supply of homes for sale continues to lag behind demand, with current inventory levels only at about half of what is considered a balanced market. Although inventory numbers are higher than they were last year, this is largely due to homes taking longer to sell once they are listed, and fewer new listings being added to the market.
As the Q2 market remains uncertain, homebuyers and sellers may wonder whether to make a move now or wait. Some experts recommend that buyers who are financially secure and have job stability should consider purchasing a home soon. This is due to the fact that the current combination of interest rates, housing prices, and inventory levels may not continue to be favorable in the short term.