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What to expect if you want to buy a home in 2023

What we'll cover

  • Predictions for the 2023 housing market

  • Trends prospective buyers and sellers should consider

  • How the market will change compared to last year

The beginning of a new year is all about fresh starts. New habits, new hobbies and, for some, maybe a new home? 

If you’re a prospective homebuyer, you might be concerned about the tumultuous housing market we saw in 2022; mortgage rates more than doubled and inventory shortages led to skyrocketing home prices. The housing market has been unpredictable, yet there is hope on horizon as we expect to see a gradual return to normalcy.

We are beginning to see home prices fall, but with the continued threat of recession, you’re likely wondering if now is the right time to make a move. By taking a look at the market dynamics and anticipated challenges facing homebuyers in 2023, you can make an informed decision about buying a home .

Recession watch

In the wake of economic upheaval spurred by the pandemic, concerns about a recession persist. In fact, the World Bank predicts a global recession in 2023, which would affect policy, and, in turn, mortgage rates. But not all economic downturns are created equal, leaving consumers wondering just how long and severe a potential recession would be.

The good news is that the current housing market does not closely resemble the conditions that led to the crisis in 2008. The market is correcting after a volatile period, and eventually, it will normalize. So, while homebuyers should keep an eye out for a potential recession, don’t let it stop you from purchasing a home if you are financially prepared.

Putting mortgage rates into perspective

As mortgage rates continued to climb during the second half of 2022, the market looked challenging. Elevated rates put a damper on refinancing , and that’s expected to continue in 2023. But it’s important to put today’s rates in context.

While they may seem high at first glance, the United States has seen much higher rates in the past. In 1981, the average mortgage rate hit an all-time high of 16.3%. In the 1990s, the average rate hovered around 8 to 10%. Although we will likely not return to the record lows we saw in 2020 and 2021, we expect rates to stabilize this year.

Home prices are trending downward, and we are seeing more inventory available. The market also is less competitive now than we have seen in recent years. This means if you’re ready to upsize, or downsize, or you're a first-time homebuyer, it could be advantageous to make a home purchase soon. Remember that investing in a home is a solid way to build wealth over time and homeownership can actually work as a hedge against inflation (that’s because as inflation rises, the value of your home will likely rise, too).

The housing market has been unpredictable, but we’ll see a gradual return to normalcy in the new year.

Smaller-town takeover

As a result of the pandemic and the work-from-anywhere revolution, people began to flee big cities for smaller towns, and this trend is expected to continue. For instance, the population in the Boise, Idaho, metro area is projected to grow by almost 70% by 2060. This expected migration over the next year will lead to high rates of home appreciation in these smaller markets.

Affordability is a major priority for a lot of buyers, leading them to consider moving across their state or even across the country . And perhaps they want to move east. The hottest housing markets of 2023 are predicted to be in the Midwest and South, with Charlotte, North Carolina, taking the top spot.

Graphic with title, “Mid-sized markets on the rise.” Picture on graphic shows the eastern half of the United States. Words on graphic are as follows: In 2023, housing markets in more modestly sized U.S. metro areas are expected to see the most growth, especially in the Midwest and South. Huntsville, Alabama. Fayetteville-Springdale-Rogers, Arkansas. Hartford, Connecticut. Jacksonville, Miami, Florida. Atlanta, Augusta, Georgia. Louisville, Kentucky. Worcester, Massachusetts. Grand Rapids, Michigan. Kansas City, Missouri. Buffalo, New York. Charlotte, Raleigh, North Carolina. Cleveland, Toledo, Ohio. Philadelphia, Pittsburgh, Pennsylvania. Charleston-North Charleston, Columbia, Greenville-Anderson-Mauldin, South Carolina. Knoxville, Chattanooga, Nashville, Tennessee. Dallas-Fort Worth, San Antonio, El Paso, Texas. The list is based on the predictions from Zillow, National Association of Realtors and Ally do it right.

A generational shift

As younger consumers are priced out of the market, the average age of the first-time homebuyer has increased. However, younger buyers are still making inroads. Ally Home has seen a 40% increase in Gen Z borrowers year over year, which tells us this cohort is still a growing demographic in the housing market. It may take them a bit more time, though, to catch up with millennials.

Consider all the factors

The housing market is always changing and evolving, and 2023 is no exception. As the new year takes shape, keep an eye on the trends influencing the housing situation to make the best decision for you. After a period of upheaval, we are seeing a slow return to stability, meaning it could be time to make your homebuying dreams come true.

Glenn Brunker is the president of Ally Home, responsible for leading the growth of Ally’s mortgage business. He has oversight of both the direct originations and bulk acquisition businesses as well as the responsibility for the servicing platform. He also leads the secondary marketing and business line risk functions.

Glenn has extensive executive experience in leading banking operations, secondary marketing, production channels, and all key risk functions. Before joining Ally in 2018, he held several leadership roles in financial services at Bank of Oklahoma Mortgage, Fifth Third Bank, National City Bank, and Oak Street Mortgage.

Glenn is a native of Chicago, Illinois with a bachelor’s degree from Northern Illinois University and an MBA from DePaul University. He has since left the Midwest and currently lives in Charlotte, North Carolina.

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Image of Glenn Brunker, President of Ally Home.

Glenn Brunker
President, Ally Home

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