As 2022 hits the final stretch, we begin to make our plans for 2023. For those who are looking to buy or sell a home, the fact is that there are many obstacles that they have to overcome, especially if their hope is to make their move at the beginning of the year. Just like with this year, we will probably see the real estate market move in more ways than we expect. A lot will hinge on where the economy will go as well as interest rates.
Because the market became extremely hot before 2022, the move had to be made to slow things down. Interest rates were sent up in order to calm things down and it’s effectively worked. While home values have only just begun to drop, there’s virtually a near-complete stop on selling compared to where things were even at the beginning of the year. Because it’s too expensive to borrow money, buyers are stuck waiting for a better option unless they have the ability to cover higher interest payments each month.
Where Is The Market Now?
While every state and even area has different degrees of how their real estate market is doing, the fact is that sales have gone down nearly everywhere. This is where the beginning of the interest rate hike strategy really begins to show its strength. By taking what would be an affordable monthly payment and making it almost too expensive to cover, interest rates will keep even the most ambitious buyers from getting the property they want.
While the number of sales is declining, home values have only just begun to drop. However, because of the strength of the consumer dollar, many believe that home values will not drop far. If you consider what the cost of rent is, even with higher interest rates, people are willing to buy if the monthly costs will be the same and they have their own home. This is part of the reason why it has taken so long to slow the market down and why many expect it to heat up again as soon as rates start going down.
Investors May Have The Upperhand In 2023
While the strategy of raising interest rates has been proven again and again to work and slow down a hot real estate market, there are some who may have an unfair advantage soon. Because there are so many investors who have the funds to buy a property without having to borrow money, these men and women will have the advantage while rates remain high. They are currently researching neighborhoods they want to invest in as they wait for prices to go down so that they can get a better deal.
What You Will Need To Jump Back In
You may not have an advantage over investors, but you can give yourself an advantage over other buyers. There are things you can do to your personal finances that will elevate your chances of getting approved for a loan. While it’s undetermined how long it will take for home prices and interest rates to go down, the time will be well spent working on these areas:
- A great realtor: Are you ready to buy now? Probably not, but just because that’s the case does not mean you should wait to find a realtor. Your realtor isn’t just someone who shows you the houses you want to see, they help you learn what to look for in properties as you are researching them online and on apps. They can guide you through the expectations of the market and help you to understand when you should buy based on your personal and financial situation. Blogs cannot tell each individual what they should do but a professional realtor can give you that assistance and help you find the best home for you.
- High income: It may seem strange to talk about your income as something you need to work on because it’s obvious. However, the fact is that lenders are going to want to lend to the people who first show that they can make enough money. Your income in some ways will impact your chances of getting approved more so than your credit score. If you can get your income higher before you start looking for a home, take advantage of it.
- Good credit score: Yes, your credit score is still important when you are borrowing money and it will influence how much you can borrow as well as how much you have to pay to borrow the money. While it’s smart to keep your score as high as possible, you do have time to work on it in the short term if you feel the numbers need to be improved.
- Low debt: Do you know what a debt-to-income ratio is? You need to learn it because this is how a lender determines how much you can afford to borrow. To help make sure that borrowers are not asking for more than they can afford to pay back, lenders will take a look at their income and actually add the monthly costs of the loan with any current debt they have like credit cards and car payments. If these numbers add up too much each month, you may not get approved.
While things have not changed when it comes to buying a home, the fact is that you now have to be ready to go at a moment’s notice. People are still not sure how quickly the market will rebound but the fact is that you cannot expect home prices to drop significantly in such a short period of time, especially with such strong consumer spending numbers. If you are waiting for the best deal, it may not happen. That’s why you have to take a look at where the market is right now, what your options are and how to best proceed. Working with a realtor is the fastest and easiest way to determine which route you should take based on how the market is right now and how it will be at different times next year.