Will sellers still have the upper hand in 2023?


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This will really come down to one key factor.

Key points

  • The low housing inventory gave sellers today an edge over buyers.
  • Things could change next year if stocks pick up.
  • If there are more homes available, sellers will have no choice but to lower the price.

Back in high school, I took a basic course in economics and learned the laws of supply and demand. In a nutshell, whenever you have more supply of a product than there is demand, the price of that product tends to decrease. And when demand exceeds supply, the opposite happens: the price of that product can skyrocket.

This is precisely what has happened in the real estate market in recent years. In 2020, mortgage rates began to plunge to record lows following the pandemic. Meanwhile, property listings have come to a halt – because after all, who wanted to deal with selling a home in the midst of a national and global health crisis?

Meanwhile, housing stock has remained low since the end of 2020. And that gives sellers a huge advantage over buyers in the real estate market, even as mortgage rates have risen sharply this year.

But will sellers retain their advantage in 2023? Maybe not. It really comes down to housing supply and demand.

Housing stock could recover

Currently, the real estate market does not have enough units to meet buyer demand. But that could change next year, either because stocks are rising or demand is falling, or both.

In fact, we may be more likely to see a drop in buyer demand than a drastic increase in inventory. As mentioned, mortgage rates have risen a lot this year, and they show no signs of slowing down. This is likely to be a diversion for buyers. And if rates continue to rise in 2023, we could see more buyers pull out of the market, narrowing the gap between supply and demand.

What could also happen is that a recession could hit. This is something economists have been warning about for months.

If the economy deteriorates, that too could easily push buyers out of the market (partly because of fear and partly because of job losses). And in this scenario, we would also have a narrowing of the gap between supply and demand.

Once demand for homes no longer outstrips available supply, sellers may have no choice but to lower prices. And it could make home ownership more affordable for buyers staying in 2023, even with higher mortgage rates.

Get ready to buy

If you’re looking to buy a home, you could have a solid opportunity in 2023 – so it’s important to be prepared. You can do this by raising your credit score if it needs work and getting rid of extra money for a deposit. Getting rid of your debts could also benefit you as a potential buyer, because mortgage lenders want to see a low level of debt relative to your income.

All told, we don’t know what lies ahead for 2023 when it comes to housing inventory and buyer demand. But if the former picks up or the latter contracts, sellers could lose their edge in the coming year. And that’s something potential buyers need to be aware of.

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