State of the Market Residential Real Estate in

STATE OF THE MARKET –

Residential Real Estate in 2023

by Lora Leon

The past year in real estate has truly been one for the books. 2022 showed rate increases and limited availability for buyers with homes selling faster than they hit the market. Wondering what the residential real estate market has in store for 2023? Experts are split on what that may look like, but they can provide valuable insight nonetheless.

OUTLOOK FOR 2023

The general consensus, as it stands now for 2023, suggests there may be a drop in home prices. However, experts believe that it will not be a steep decline like we saw in 2008 after the 2007 housing bubble burst. Some are even suggesting that the 2023 market may outperform some pre-pandemic trends.

Other analysts, however, are suggesting that there is likely to be an increase in home prices, albeit a small one. If inflation trends continue to rise aggressively, mortgage rates may increase due to changes by the Federal Reserve System. This could directly impact the housing market. However, if the rate of inflation slows, then the Fed might soften the financial conditions and interest rates may fall again.

In 2022, we saw a rise in home mortgage rates. This slowed home sales nationwide causing price drops across the market. This shifted the balance of the housing market away from sellers, putting more power in the hands of buyers. Will 2023 continue this trend? The answer is still up in the air.

Fannie Mae, however, has released a report stating that the current housing market will push the United States into another recession at the beginning of 2023. And according to their predictions, this may lead to a more significant drop in home prices. Looking at 2023 as a whole, the ESR group has predicted an average fall of home prices of about 1.5%. At the same time, Zillow has predicted just the opposite, stating that home values should rise in most markets across the country.

2023 OUTLOOK FOR THE GREATER INDIANAPOLIS MARKET

Bright MLS has already made some predictions for Indianapolis and the surrounding areas in the upcoming year. They have foreseen a 4% (on average) home price increase as compared to average prices seen in 2022. This is typically great news for sellers, but not necessarily good news for buyers. However, if you are selling a home to buy another, you will reap the benefits when selling your current home. First time buyers might be most affected by an increase in housing costs. However, Bright MLS predicts that demand will make a rebound, but there will be low availability and inventory. This may lead to a nine year low in home sales (giving power back to the buyers). Their predictions also forecast stabilization of mortgage rates, which are estimated to end up at about 6%. They also predict that home prices should remain fairly stable throughout the year. So, if you’re looking to buy, sell, or rent, you may see some changes and even unpredictability in pricing this year. The general consensus now is that home buyers will have more leverage than sellers in 2023, so take that into consideration as you move forward with your plans this year, and consult with a seasoned real estate expert.

Indianapolis area average home prices are predicted to increase by 4% in 2023.

Source: Bright MLS