This time of year, many people take a personal inventory of their lives and identify potential growth opportunities for themselves in the upcoming year. These are typically fitness, wellness, and career goals, but we firmly believe that the best way to improve your overall quality of life long-term is by building wealth through real estate.
We are honored to continuously be your go-to resource for support with identifying, planning, and executing your real estate goals year after year! Our team of real estate experts is committed to not only helping you achieve your goals but also keeping you well-informed every step of the way. While you start thinking about your goals for the new year, here is what you can expect from the real estate market in 2023.
Stabilizing Interest Rates
During 2020 and 2021, interest rates for mortgages were at an all-time low, with many homebuyers locking in interest rates around 3%. Rates have been steadily increasing for the duration of 2022 with the national average peaking just above 7% in early November. According to Freddie Mac, the main industry source for mortgage rates, the average interest rate for 30-year fixed-rate mortgages between 1971 and 2022 is 7.76%. Although interest rates have stayed under the historical average throughout this past year, the quick increase in interest rates had an adverse effect on home affordability and pushed many homebuyers out of the market.
Over the past two months, rates have improved at the quickest pace all year, with the national average experiencing a 1% decrease. For 2023, Freddie Mac predicts less overall fluctuation in interest rates with the average dropping from 6.8% in the 4th quarter of 2022 to 6.2% in the 4th quarter of 2023. This will create a more stable environment for the real estate market, making it easier for both buyers and sellers to plan their homeownership goals for the upcoming year with confidence.
Increased Demand for Homebuyers
With the fluctuation of interest rates this past year and decreased affordability, many homebuyers have been hesitant about moving forward with their homeownership goals. This has caused an increase in the amount of time homes stay on the market and has steadily increased the inventory of homes for sale in the Twin Cities. According to Lawrence Yun, Chief Economist for the National Association of Realtors, “The upcoming months should see a return of buyers, as mortgage rates appear to have already peaked and have been coming down since mid-November.”
As we enter the Spring market, we expect to see an increased demand for homes and buyers will return to the market en masse. If you have the goal of purchasing a home in 2023, NOW is the perfect time to accomplish that goal! While many buyers are waiting to see these market changes, we have now equipped you with the foresight needed to make an informed decision before we see an increase in demand and intense competition for the best homes.
Inventory of Homes for Sale
The number of homes for sale in the Twin Cities has been steadily increasing over the past year, but it remains at an all-time low. Between the 4th quarter of 2021 and the 4th quarter of 2022, home inventory increased by 4% within the Twin Cities region and, more specifically, increased by nearly 13% in the City of Plymouth, according to NorthstarMLS. However, compared to the 4th quarter of 2019, which was still considered to be a strong seller’s market with limited inventory, the number of homes for sale now is down nearly 30% in the Twin Cities region and over 40% in Plymouth.
With a continued lack of inventory in Plymouth and in the Twin Cities in general, we are still in a strong seller’s market. If you have the goal of selling your current home in 2023, home inventory is now at its lowest point in the 12-month cycle for Minnesota. To avoid more competition in the Spring and Summer, NOW may be the perfect time to sell your home.
No matter what your real estate goals are in 2023, our team of expert agents has the tools to help you accomplish them, keep you well-informed, and even have some fun in the process!