Should you buy a house? Should you wait it out? Will mortgage rates continue to climb (along with the cost of everything else)? Over the past two years, the housing market has felt like a roller coaster, and searching for a home right now can make your head spin. We get it. That’s why we turned to Realtor.com Chief Economist Danielle Hale—and pored over the latest advancements in the industry—to get a sense of where things are headed and what you can do to be in the best spot possible to secure the home you’ve been dreaming of.
4 Ways Homebuying Will Change by 2023
1. Fall 2022 May Be the Best Time to Buy This Year
We’ve been in a seller’s market for the past two years, as people clamored to outbid each other on houses, taking advantage of super-low interest rates (and, for some, a pandemic-bred opportunity to work from anywhere). But that competition—along with rising mortgage rates and inflation—soon sent the pendulum swinging in the other direction, causing buyers to slow down on making offers. (As of May 2022, a Forbes Advisor survey found 34 percent put their search on hold entirely.)
But relief may come soon for buyers: “Conditions are still generally favorable for sellers, but they do not hold as many cards as they have over the past couple of years and will need to price competitively and possibly consider making buyer-friendly concessions in their contract to get to the closing table,” Hale explains. “For buyers, late 2022 is likely to offer more for-sale options and cooling home prices.”
(Fall is typically a great time of year to buy, simply because there’s less competition; many people shift their focus to the holidays and pause their home search.)
2. Mortgage Rates Will Likely Climb Through the End of 2022
That said, Hale warns that anyone shopping for a home will have to factor in rising mortgage rates, which are likely to hover around or exceed 6 percent, as well as other ballooning costs affecting their budget, such as groceries and electricity. (The chief economist at the National Association of Realtors, as well as the experts at Freddie Mac and the Mortgage Bankers Association, have made similar predictions.)
3. It Could Be Easier to Score an Off-Market Home
Even as homes start to stay on the market longer, it can still be difficult to secure something in your price range. That’s where real estate marketplace Opendoor’s latest offering comes into play. Opendoor Exclusives features homes 14 days before they’re shared on the MLS—where they’re picked up by Trulia, Zillow, Redfin and the like—and at a lower price. There’s no haggling on the price, though they do offer an appraisal price match guarantee. It’s currently only available in the Houston, Dallas-Fort Worth and Austin areas.
4. More People Are Considering Adjustable Rate Mortgages (ARMs)
Applications for ARMs are the highest they’ve been in 15 years, according to Zillow. While they typically initially offer a lower mortgage rate than 30-year, fixed-rate mortgages, that figure can rise or fall once the introductory period ends—though it’s safe to assume the former.
While the very idea of ARMs can give people terror flashbacks to the subprime mortgage crisis of more than a decade ago, stricter laws are in place now to make them “much safer and more transparent,” Eric Stein, senior vice president at the Center for Responsible Lending, told the New York Times, such as getting rid of prepayment penalties and ensuring borrowers can reasonably repay the loan.
Still, the Times recommends calculating what your payment would be if it rose to the loan’s cap, so you can ensure you’d feel comfortable making those payments in a worst-case scenario. (The Consumer Financial Protection Bureau also offers a guide to helping understand today’s ARMs.)