How the Latest US Real Estate Trends Could Affect 2023

The real estate market since 2020 has been a roller-coaster ride only palatable for the most extreme riders.

Mind-boggling prices, skipped inspections, and offers above asking price became so commonplace that homebuyers made more emotional decisions than intellectual choices. This led some buyers to be underwater on move-in day, saddled with big mortgages and a long list of improvements. 

Thankfully, the real estate market has calmed down in the fourth quarter of 2022, making 2023’s projections a welcome shift. If you’re a potential homebuyer, it’ll be important to understand what recent market movements mean for you. Look at these real estate trends as you formulate your home search strategy so you can land your perfect place. 

1. Your Credit Score Is More Important Than Ever 

Your passport to all things financial, your credit score is a number that’s constantly tabulating your financial reliability. If you’ve neglected to manage your score, today is the day you change that bad habit. Your credit score is often the first thing a potential lender requests as you seek loan pre-approval. Start by requesting your free annual credit report and review it for accuracy. Then check your score with each of the three credit bureaus.

You should make sure to keep up with current mortgage news to make sure your credit scores are where they need to be. Currently, credit scores of 580 are the minimum required for a Federal Housing Association loan. However, that’s not all that’s needed for FHA loan pre-approval — you’ll also need to bring a 3.5% down payment. Even with a minimum 580 score and down payment, you may end up paying more for your borrowed money.  

The cost of money has risen as the country has tried to rebound from the pandemic. As the government doled out stimulus checks, the economy enjoyed artificial spending power. Once employers attempted to shift back toward normalcy, some employees didn’t return. Whether you blame the higher wages used to lure workers back or corporate price gouging, the result has been sky-high inflation.  

The Federal Reserve has attempted to cool inflation by raising interest rates to slow down spending. While economists can debate this technique’s effectiveness, it means the cost of money is higher. The good news is, if you bring a 700+ credit score to your home search, you’ll likely reduce your monthly mortgage payment.

2. It’s Not Just Location Anymore

Traditionally, buyers selected a geographic area by circling a map on their favorite real estate search site. Now buyers are looking first toward amenities rather than ZIP codes. Thanks to another post-pandemic shift, the impact of remote work continues to shape real estate listings and wish lists alike. 

While many employers have requested their employees return to the office, even part-time, buyers are looking at their homes differently. If pre-2020 you would have preferred a city-center condo within walking distance of restaurants, today you want more within your four walls. Expect buyers to ask for — and an increasing number of listing descriptions to boast — home-based amenities. 

Structural features like outdoor living areas, lush landscaping, and luxury baths will take precedence. Remote work essentials like home offices, strong internet connections, and well-insulated walls are almost required. Buyers are looking for properties that are well-suited to staying put, even if that means a different geographic location than expected. 

While the market was red-hot in 2021 and 2022, buyers often had to accept less-than-ideal terms. With little negotiating room on price or inspection items, many took on a large loan and an accompanying to-do list. In 2023, there should be a return to more familiar negotiating practices with a give-and-take mentality. Buyers should confidently request fixes for safety-related and costly repairs, and sellers should be willing to complete them. 

3. The Average Time to Close Will Increase, and Delays Will be the Norm

The home industry has not been spared by the nationwide talent shortage. This shortage will materialize as timing delays at every step of the homebuying process. To get ahead of this and avoid further waiting, homebuyers can get their financial information in order beforehand. In addition to gathering loan pre-approval documentation, improving savings habits and avoiding major financial changes can help. 

After securing a loan pre-approval, buyers should stay on top of requests from their buyers’ agent and lender. Responding to emails and phone calls quickly can help get essentials like inspections and underwriting completed efficiently. When paperwork or additional information is requested, get the details to the requestor as soon as possible. If you take too long, already overloaded professionals may move on to the next file. 

The mortgage industry has already been rocked by the Fed’s increased rates. As companies scale down their workforce, more workload is placed on already exhausted employees. Plus, many underwriters and closers work on commission, so the easier your loan is to close, the better. 

When it comes to your inspection, be empathetic to the appraiser assigned to your property. After the subprime mortgage crisis that contributed to the Great Recession, many rules changed. One was that the communication and selection of appraisers were separated from your lender. This change helps ensure your appraisal can’t be influenced by an unethical lender, but it can add more complexity. Try to provide documentation quickly so your appraiser can have what they need for their research. 

4. No Matter the Real Estate Climate, Homeownership Continues to be a Solid Investment

The milestone of becoming a homeowner can be both stressful and exhilarating. And housing is a sector that rides the highs and lows of the economy. Thankfully, real estate has been and continues to be a great investment. Aside from providing a roof over your head, homeownership is one of the best ways to build wealth. 

Home values have a longstanding track record of appreciating, meaning your investment today will far surpass the cash outlay. Rather than paying monthly rent, homeowners are making deposits toward a prosperous future. Getting to live in a comfortable home that meets their needs is just icing on the cake.