This year, the real estate market took a drastic turn. Though low inventory remains a top concern for many homebuyers, there are steps you can take now to help you score a home in 2023.
To guide you, we welcomed a panel of experienced real estate agents from across the country on the latest vipHome Podcast Real Estate Roundtable. Watch now and read below to learn the five top things you need to know about the 2023 real estate market!
1. Buyers, be a bit savvier now.
“Buyers are not as much in a rush now,” says Katie Landow, a Compass real estate agent in New York City with more than 10 years of experience. “They’re taking their time. They’re realizing that the market is not moving at the pace it once was.”
During the first two years of the pandemic, homebuyers (and their agents!) endured bidding wars and made concessions, including forgoing home inspections. While you may not land your perfect dream home, you can at least take a bit more time now to make your decision.
“Buyers are now realizing that they do have options,” says Solomon Thomas, a RE/MAX real estate agent in the Twin Cities with more than nine years of experience. “When we didn’t have any inventory, buyers were buying whatever they could.”
“First-time buyers are reevaluating their budgets based on interest rates,” says Katie. “They’re still looking to buy, but it’s a slower, more educated process.”
2. Interest rates have been a game-changer.
“The interest rate is definitely going to dictate the market moving forward,” says Solomon. “We hope that eventually it’ll hold steady, but buyers are apprehensive right now.”
A steady interest rate in the new year may bring home buyers back out in full force, just in time for the usual springtime rush.
“The nice thing is that sellers are now coming back to Earth and realizing that it’s not a seller’s market,” says Solomon. “They’re now open to buyers’ concessions.”
Because of this, buyers may see price drops in the later months of 2022 and into 2023, but right now –
“Prices are still out of control,” says Shannon Collins of HomeSmart in Arizona, who has been selling homes for more than two decades.
3. Always do your due diligence.
When our brand ambassador Laurie Smith recently tried to find a home, she lost three to bidding wars. However, what was most shocking was some sellers’ refusal of home inspections.
“I wasn’t going to buy an uninspected home,” says Laurie. “There just comes a point where you draw a line in the sand and say, ‘When does it hit foolishness?’”
Solomon agrees. “It seems inappropriate, especially when you’re telling a buyer to disregard their due diligence.”
While sellers set those terms, buyers have the right to disagree, and home inspections and other due diligence, including mold, radon, and lead inspections, should be completed before purchasing a home.
Thankfully, the market has stabilized somewhat where most buyer protections are back in place.
“Appraisal waivers are gone,” says Shannon. “That’s when buyers say they’ll pay whatever, whether it appraises or not.”
4. If you’re a first-time home buyer, consider a lower price point or a smaller home.
Rising rents have kept first-time home buyers searching for a new living space, but they need to be flexible – both with their home desires and budget.
“Budgets are changing to a lower price point to accommodate [the higher interest rates],” says Katie. “Unless they have a really reasonable rent, they’re still looking for something, just maybe not right now. Maybe in a year, taking their time a little more.”
Of course, homebuyers may want to consider buying a fixer-upper, though renovation and home improvement projects may take longer than usual to complete.
“Construction costs and just the ability to get anything done – is awful,” says Shannon. “Buyers don’t want to deal with it, and they’re willing to wait until they find a home that’s move-in ready.”
Therefore, you may be able to land a deal by buying a fixer-upper and waiting a bit longer for your new home to become your dream home. Katie has seen this trend in New York.
“New York is an older city and hasn’t been updated. The new builds now are so expensive. The price per square foot is astronomical, so what you’re getting in terms of space and storage isn’t what some of the older layouts and buildings are providing.”
Laurie, too, has seen issues with her interior design clients.
“The supply is tough. I did my own renovation when I moved in here just a year ago, and it was a miracle I could find a contractor to raise two ceilings.”
5. Don’t be overwhelmed by home improvement projects.
Some of Katie’s buyers see their home’s 10-year trajectory and are willing to wait sometime to move in. Solomon has seen his clients ponder home improvement projects when buying a home and has provided guidance where possible.
“While I’m not an interior designer, I try to suggest areas that they can improve right away that’ll make a difference.”
Solomon also breaks down the potential home improvement projects, so they don’t seem overwhelming to the buyer.
“There are things that they can work on over the years as they occupy the residence.”
Considering selling your home in 2023?
The one thing home sellers need to do is be smart about their home improvement projects. As an interior designer, Laurie sees issues when sellers take short cuts on projects prior to resale.
“Let’s face it – when you’re renovating for resale, you’re not going to put the finest of the fine in there,” says Laurie. “What I found frustrating as a buyer was – sellers had just renovated the kitchen and bath, but done builder spec improvements. So I was going to have to rip that out and pay for renovations.”
What Laurie found far more appealing was buying a home with updated systems.
“Homeowners had just replaced brand-new heating and air,” says Laurie. “They had a state-of-the-art gas range in the kitchen and a water purification system, so I didn’t have to go back and put money into the infrastructure. I would much rather buy those value items than whatever tile they thought was pretty on the backsplash.”
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