Is 2023 a good time to buy or sell a house? Of course, like with everything, the answer depends on your situation. The real estate market has shifted and with that there are challenges AND opportunites for both buyers and sellers. That is why I am sharing to pros and cons of buying and selling a house in 2023.

Pros and Cons of Buying a Home in 2023

Pro #1 of Buying A House in 2023: Less Competition

You have no idea how much of a pro this is unless you have tried to buy a house in the last couple of years. Seriously. Competing for a house with 50 other buyers or with buyers who offered 33% over the list price in cash was intense to say the least. Currently on the most desirable houses you will still compete with multiple offers, but it may just be 1 or 2 additional offers. Not 40, so big win.

Pro #2 of Buying a Home in 2023: Buyers Have More Choices

Homes are staying on the market a little longer now and that is contributing to more available homes for sale. We currently have 46% more homes available than we did on January of

2022. However, we are still a long way from being back to pre-pandemic inventory levels, because we have 32% fewer homes available than in January of 2020.

So that means you have a better chance of finding a home that suits your needs and who knows, you may even find 2 or 3 that you really like and you can actually choose which one you’d like to make an offer on.

Pro #3 of Buying a Home in 2023: Contingencies are Back

Gone are the days that you would forego an inspection or appraisal contingency. Contingencies like that protect buyers and allow them to get their earnest money back if they terminate the contract because of issues with the inspection or if the appraisal comes in too low. Without these contingencies, buyers have no out without losing their earnest money.

Personally, I would never advise my clients to forego an inspection. Those are absolutely crucial, because you have to know what you are buying. And making an offer contingent on the sale of your house? There was absolutely no way you could get an offer accepted with that. Now sellers are accepting contingencies again!

Pro #4 of Buying a House in 2023: Sellers are More Willing to Negotiate

With homes sitting on the market longer, sellers are more willing to negotiate. From accepting those offers with contingencies, to lower sales prices to seller contributions, it is all possible. These sellers contributions are especially interesting, because you can use that to buy the interest rate down.

For instance, while lowering the price by $10,000 on a $500,000 house can lower the buyer’s monthly payment by $60, if the buyer applies that same $10,000 to buying down

the rate by a .5%, their payment would be $148 per month lower. It is the same net to the seller, but it makes a big difference to the buyer. And it really helps negate the higher interest rates we are seeing in 2023.

Pro #5 of Buying a House in 2023: Appreciation Over Time

While we can’t say for sure what home values will do in the next month or even a year, real estate is a proven investment over time. Experts are divided, with 3 of them calling for slight appreciation and Fannie Mae and Freddie Mac and Zelman calling for depreciation. However, everyone agrees that over the next few years, home values will rise by their historic average of 3-5% per

year. So even if values drop a little in the short term, in the long term, they will continue to go up. Real estate is the corner stone of wealth building here in the US, so over time I believe real estate is a solid investment.

Unfortunately, there are some cons to buying a home in 2023 as well.

Con #1 of Buying a House in 2023: Uncertainty in the Real Estate Market

Are housing prices going up or down? Are interest rates going to go up, or will they go down? And by how much? Nobody has a crystal ball and can tell you exactly what is going to happen. If that was the case, everyone would be timing the market and come out making a bundle. Unfortunately, most people who try to time the market end up getting burnt. You never know when the bottom of the market is until 6 months later. You have to make your move when the time is right for you. Markets go up, they go down, but in the long run, the housing market is a good investment.

Con #2 of Buying a House in 2023: Interest Rates

Interest rates are about double of what they were in January of 2022. To put that into context, the average monthly mortgage payment is about $1000 more than it was a year ago. That has priced a lot of people straight out of buying a home.

And although they have come down in December of 2022, they are still much higher than the 3-4% we’ve been seeing over the last few years. And they are not likely to go back there any time soon. Higher interest rates make mortgage payments higher and you are not able to afford as much house as you could in 2021 or early 2022. For every 1 percent increase in mortgage rates, your buying power goes down by 10%. SO if you were qualified to buy a $500,000 house at a 4% mortgage rate, at a 6% interest rate, you can only afford a $400,000 house.

With the Federal Reserve determined to fight inflation by bringing on a recession, they will continue to raise the interest rate. That does not necessarily mean more increases in the mortgage rates though. One thing we do know is that recessions bring lower mortgage rates, so there is hope that mortgage rates will drop more. How low nobody knows, but do not expect them to go back to those low, low rates we’ve seen in the past.

So what happens if you buy a house with an interest rate of say, 6.5%? If you like the house and can afford the payment, you’re fine. If the interest rates go up, your mortgage payment does not. If the mortgage rate goes down, you can always refinance.

Con # 3 of Buying a Home in 2023: Housing Affordability

This is a serious problem for those trying to get into the housing market, such as first time home buyers. The median home price in Fayette and Coweta Counties over the last 2 years, in 2021 and 2022 has gone up by more than 25%. You heard that right. The median sales price in 2020 in Fayette County GA was $347,011. In 2021, it went up by 12% to $395,000. In 2022 it went up by another 17% to $462,500.

A few years ago, it was very reasonable for first time home buyers to get a good home for around $200,000. In 2022, only 1.5% of the homes sold went for $200,000 or less and most of those were complete fixer uppers. I am a big proponent of buying houses that need some cosmetic updates, but these needed much more than that.

So affordability has taken a big hit. If you already own a home and need to buy another, you have less of an issue, because you are likely selling a house for a high price and big profit. It is more of a trade off.

So is it a good time to buy a house in 2023?

It depends. If you are planning on staying in your home for several years, then yes. If you find a house you love and can afford with the current interest rates or with a seller paid buy down, absolutely go for it. Is it possible that you could pay less in a few months? Yes. It is also possible that you could pay more.

Timing the market is always risky. If you think you’ll be moving again in a couple of years, then maybe you shouldn’t buy a house in 2023. Every situation is different and you should absolutely discuss YOUR situation with a trusted advisor like me.

Pros and Cons of Selling A House in 2023

What if you also have a house to sell? Don’t worry, because here are the pros and cons of selling your house this year.

Pro #1: Home Values

Holy cow! If you’ve owned your home for a while and looked at the median sales price lately, you know what I am talking about. The median sales price for a home has increased by over 25% here in Fayette County over the last 2 years. And while that is softening a little, you can still get a lot of money for your house. The experts are divided about where home prices are going, with 3 of them calling for slight appreciation and Fannie Mae and Freddie Mac and Zelman calling for depreciation. Regardless, if you’ve owned you home for more than 2 years you will make a great profit.

Pro #2: Millennials

What? Why are millennials a pro? Millennials are the single largest generation, even larger than the Baby Boom generation and they are in their prime home buying years.

A survey from Bank of America shows that 67% of millennials – also known as Gen Y – are “likely” to buy a house in the next two years. That is a lot of buyers that are looking for a new home and I am sure one of them is looking for a house just like yours.

Pro #3: You Can Buy and Sell at the Same Time

If you are selling your house, you are likely buying a new house as well. And it was a lot more difficult to do in 2021 and 2022. You could not make an offer contingent on the sale of your house, since there was no way sellers would accept that in the overheated market. You would have to jump through hoops or sell your house first and move into an AirBnb until you could buy the house you liked.

Of course there were options like selling you home to a large company and renting your house until you closed on your new home. You usually would get less than you could get on the open market and you would pay more fees for that service as well. In that scenario you left a lot of money on the table, but ultimately it got you in the house you wanted, if you were lucky enough to get your offer accepted.

Fortunately, now that the market is normalizing you will be able to buy and sell at the same time. You can close on the same day, for instance close on the sale of your house in the morning, and buy your house a couple of hours later or even back to back if you are closing with the same attorney. You only have to move once and that is a HUGE advantage! That makes buying and selling a house in 2023 so much easier than it was previous years!

Pro #4: Prep, Price and Pre-market for a Great Price

The good news is that yes, you can still get a great price for your home. But you have to be smart about it and these are some things to keep in mind.

Prep your House

You have to prep your house appropriately. That means it has to be squeaky clean, and with fresh paint. You have to pre-pack as much as possible, so that your home feels open and spacious. That first impression really is important and you want potential buyers to feel they can move right in and make it their own. I have handy checklist that will help you get your house ready.

Price Your House For the Current Market

You have to price your house appropriately for THIS market. Don’t overprice your house so that you have “room to negotiate”. When you overprice your house, you are not getting the right people to look at your house. So you are reaching fewer buyers, which results in fewer showings. Overpriced listings stay on the market longer. And what happens to houses that are on the market longer? Buyers start wondering if there is something wrong with the home, especially as you start lowering the price. You end up chasing the market, ending up with less than you would have if you had put it on the market with the right price to begin with.  Pricing it right from the get go will net you more money the long run.

Pre-Market Your Listing

And you have to have a realtor who knows how to market a listing. Putting a sign in the yard is not enough. Just putting it on the MLS is not enough. Your realtor should have professional photography, and produce multiple videos. That includes a longer listing video for YouTube, as well as multiple short videos highlighting the property for Instagram, TikTok and Facebook. What kind of advertising do they do and how do they create buzz for your listing?

It is vitally important that you don’t just have a listing agent, but that you have a marketing agent, like me!

Con #1:Homes are Not Getting 30 Offers on the First Day Anymore

In 2021 and the first half of 2022, the housing market was so overheated that buyers would offer tens of thousands over the list price, waive all contingencies and included their first born. I actually offered to buy pizza for the sellers to celebrate getting their house under contract. We didn’t get the house.

It got so bad that realtors were joking that they would just send a blank contract over and have the listing agent fill it out with what the sellers wanted. That market was not healthy and definitely not sustainable. The current market is normalizing.

With interest rates higher, there are currently fewer buyers and they are choosier. They are more thoughtful, take their time and that takes us to

Con #2: Homes Take Longer to Sell

Homes are sitting on the market longer. However, that does not mean that ALL homes are taking longer to sell. There still are plenty of homes that are desirable to buyers and get multiple offers. However, homes that are overpriced because the sellers are acting like it’s 2022 will sit for weeks and months. The market time over the last 60 days in Fayette County was 30 days. Over the last month it was 35 days. So definitely an upward trend. However, 32% of those homes sold in 10 days or less.

Con #3: More Competition

With houses sitting on the market longer, that means that there is also an increase of homes for sale. A huge part of the rise in sales prices was because homes were selling so fast, there were very few homes on the market. That is changing and the amount of homes available is increasing. Although the inventory of homes on the market is up by 46% compared to January of 2022, it is still down by 32% over 2019, which was considered a solid sellers market.

When there is more competition for buyers, you have to have a house that stands out compared to other homes in that price point. Be sure to stay to the end of that video to find out how to do that.

Con #4: You Need More Than a Sign in the Yard to Sell Your House

We have already established that you don’t get 30 offers on the first day anymore. It is going to take more than putting a sign in the yard and placing your house in the MLS. We are talking professional photography, videography, advertising and generally putting a lot of eyeballs on your house. It also needs to be in tip top shape to get those buyers’ interest.  If not, expect it to linger on the market.

Con #5: Fewer Buyers

I mentioned this before, but with the current interest rates, the pool of buyers for your house is smaller. Higher interest rates make mortgage payments higher and buyers can’t afford as much house as they could in 2021 or early 2022. For every 1 percent increase in mortgage rates, buying power goes down by 10%. If they were qualified to buy a $500,000 house at a 4% mortgage rate, at a 6% interest rate, they can only afford a $400,000 house. That reduces the amount of buyers that can buy your $500,000 house significantly.

Is 2023 a Good Time for Buying and Selling Your House?

Ultimately, no one has a crystal ball, so I am not telling you that now is the time to sell or buy. Sell your house when the time is right for YOU. But I AM telling you that there are buyers out there. I have multiple buyers that are actively looking for homes. And if you want to chat about buying or selling a house in 2023, book a free, no obligation consultation with me at talkwithdaphne.com.