Navigating the 2023 ‘Nobody’s Market’
Jan Stapleton - 2023 NETAR President
Thinking about buying or selling a home in 2023? Here are a few basics to help guide you through some confusion and media myths.
NOW IS NOT A BAD TIME TO BUY
Yes, the current market still favors sellers. But it’s slowly shifting. Some sellers are sticking to their asking price and hoping for the cash or above-asking deal. During November, 147 of them pocketed an average of $37,338 over their asking price.
Others are coming off their asking price to seal the deal. During November, their ranks increased to 266. They cut their asking price by an average of $19,150.
The rest got their asking price.
According to Realtor.com’s Chief Economist Danielle Hale, 2023 will look more like a nobody’s market instead of a sellers’ market as we transition toward more normal conditions. But don’t expect that new normal to materialize soon. Although interest rates are coming down, and expected to settle in at the 5% to 5.5% range, inventory continues to increase at a snail’s pace. And then there’s the wage issue. They still lag both home price increases, rents, and inflation. It’s a toxic stew that makes housing less affordable.
There is a lot of talk about the surge of new homes in some stage of development. But so far, the building permits for them are not progressing as fast as speculation. At the end of the third quarter, builders had pulled permits for 1,291 new homes in the Tri-Cities region. That’s 297 more than the first three quarters of 2022, but only 15 more new homes than the 2021 net gain. What’s holding up new inventory is not demand. A labor shortage and continued supply chain disruptions are the primary culprits, followed by economic uncertainty.
With that said, it’s still a good time to either buy or sell for some consumers. The economic reality is over time, real estate builds equity that equals wealth. Mortgages can be paid off. But the rent goes on forever and builds wealth for the landlord, not the renter.
The bottom line is a good or a bad time to buy or sell depends on the financial goals and needs of the individual.
YOU DO NOT NEED A 20% DOWN PAYMENT
Down payments vary. Twenty percent is cited because it’s the cutoff for private mortgage insurance (PMI) which adds to the monthly mortgage payment. There are programs to help reduce or eliminate the down payment. Spend some time researching what state and federal programs offer that help.
BUYING A HOME DOES NOT HAVE TO EQUAL HEAVY DEBT
If you focus on the debt total, it can be overwhelming. But not all debt is bad. Make sure you can afford your monthly payment and not putting yourself in a “house-poor” situation. Experts suggest that the ideal amount for housing is 25% to 30% of an individual’s or a family’s income. Take into consideration all your monthly expenses, not just the ones you report to the lender on the application. In the months you have a little extra money, you can add it to your mortgage payment and cut the life of the mortgage significantly over time and that monthly mortgage payment gains buyers equity in the home. Equity is a financial asset the buyer can use to pay off debt, use for a down payment on a step-up home purchase, or even buy a second home.
WORK WITH A PRO
One of the best ways to navigate this “nobody’s market” is by working with a professional. After you’ve interviewed several local Realtors® and talked to their clients’ references, spend some time developing a solid relationship with your Realtor®. What type of property are you looking for? How much can you afford? What are the deal breakers? How do you want to communicate – in person, by phone, by text, or by email? Once you’ve done that, stay with him or her. Consistency and a strong personal working relationship yield better results than shopping agents.
NETAR is the voice for real estate in Northeast Tennessee. It is the largest trade association in the Northeast Tennessee, Southwest Virginia region, representing over 1,600+ members and 100+ business partners involved in all aspects of the residential and commercial real estate industries. Weekly market reports and information for both consumers and members are available on the NETAR website at https://netar.us