There’s an old adage in real estate: location, location, location. But ever since the Federal Reserve began its series of inflation-fighting interest rate hikes last year, a new mantra has emerged: mortgage rates, mortgage rates, mortgage rates. Higher rates had the immediate impact of dampening homebuyer affordability and demand. But this year, we’re seeing further repercussions. While analysts expected listing inventory to swell as sales declined, instead, home owners have been pushing off plans to sell because they feel beholden to their existing, lower mortgage rates. So what impact is this reduced demand and low supply environment having on home values? And what can we expect from the real estate market in the coming months and years? Here are several key indicators that help to paint a picture of the current market and where it’s likely headed.

It's not easy being a first-time home buyer right now. At the end of last year, housing affordability hit an all-time low.1Additionally, mortgage rates have risen significantly since 2021, while inventory remains tight for many property categories, but especially for starter homes. Even lower-priced condos are harder to snag these days, as investors and downsizers muscle out first-timers by offering stronger, often cash-heavy bids.In fact, according to the National Association of Realtors, only 26% of last year's homebuyers were first-timers—the lowest share on record and down from 34% a year prior. This underscores just how steep a hill new buyers are facing.3 As a result, many first-time homebuyers are finding that they need to get creative or risk renting for longer than they planned. If you, too, are struggling to afford home ownership, here are some workarounds to consider as you plot your first home purchase.‍ 

A home is normally an asset that appreciates in value over time, therefore purchasing one is still regarded as a crucial component of the American dream. If you don't have the customary minimum down payment—ideally, 20% of the purchase price for a conventional loan—or belong to a particular group, being a first-time buyer may open the door to tax benefits and federally backed loans. Even if you are not a novice, you can be eligible for a first-time purchase tax credit. As a first-time buyer, you might potentially be eligible for down payment or closing cost assistance programmes. Your down payment and closing fees may be covered by these programs, which may be run by state governments or non-profit organizations. This will enable you to realize your goal of becoming a homeowner. 

Over the past few years, many of us have spent extra time at home—and that means we appreciate the personal design touches that make a house cozy and comfortable more than ever. Some of us have adapted our dwellings in new ways, from creating functional home offices to upgrading the appliances we use most. But while it’s important to make your home your own, it’s also smart to think about the long-term impact your renovations could have on its value.

So what can we expect in 2023 with mortgage rates? Will they continue to climb? Could home prices come crashing down? While this is one of the more challenging real estate periods to forecast, this blog talks about what several industry experts predict will happen to the U.S. housing market in the coming year.