As it stands in mid-January of 2023, where is the spring home purchase market heading?  This is a question that is asked every year in early winter.  In some years, such as 2021 the answer was clear.  The market was heading straight up.  With mortgage rates at historic lows and pent-up pandemic demand, the market for sellers boomed.

At the start of 2022, the direction of the market was less clear.  Inventory was still low and rates were starting to tick up.  By the latter part of 2022, the purchase market has slowed significantly.  Mortgage rates spike and both sellers and buyers were nervous.

Luckily, we have seen some positive changes since the end of last year.  Mortgage rates have dripped from recent highs and have since settled.  The purchase market has shifted from a complete seller’s market toward more of a buyer’s market.  Home prices have retreated from their high points in 2021 and early 2022.

Although there is still uncertainty in the market, the green shoots of spring are ready to poke through.  Home inventory although still well below historical norms is starting to increase.  New build homes are again starting to pop up at a faster pace.

I believe we will see a continued increase in inventory throughout the year.  However, the year will still end with inventory below the norm.  Mortgage rates will fall further.  Rates will not approach their historic lows of 2021, but will still end the year lower.

In most metro markets, home prices will fall within a tight range.  Some markets will be harder hit, primarily the markets that saw the biggest gains over the previous few years.  Overall, prices will fall less than the 10% correction mark.

Inflation in some areas will remain persistent.  However, all-in-all, everyday inflation is retreating and will be considerably lower by year’s end.  This year will be a better housing market, than last year.  Ultimately, it is setting up for a big uptick in home sales in 2024 and 2025.