Yes, the numbers went down, but what actually happened?

Each quarter of 2022 saw a year-over-year decline in the number of sales, with a dramatic 28% dip among single-family homes in the fourth quarter. Each quarter also saw a year-over-year rise in median price, with a peak of $725,000 in the second quarter (10% higher than Q2 2021). Thereafter, a deceleration trend kicked in: By the fourth quarter, median price had dropped to $649,900 — up just 4% from Q4 2021.

Over the course of the year, months of supply grew for single-families and condos alike. Meanwhile, absorption rates (which measure how quickly buyers are snapping up properties in a particular market) shrunk for both single-families and condos. Of particular note: Months of supply for the single-family market was up 114% year over year by the end of 2022.

For those of you just skimming this article for statistics, this is your section!

In comparing 2022 with 2021, single-family home sales shrunk 16% and condo sales fell 22%. Meanwhile, average prices of single-families and condos were up 9% and 8%, respectively. Median prices also climbed for single-families and condos — 8% and 7%, respectively.

What can buyers and sellers expect in 2023?

Housing experts are predicting prices will do anything from stay flat to rise slightly in 2023. The great unknown is the state of interest rates.

The Mortgage Bankers Association (MBA), National Association of Realtors chief economist Lawrence Yun and Realtor.com are among the industry authorities who foresee that mortgage rates will fall in the second half of 2023. The MBA most recently projected a year-end rate of 5.4%; Yun placed this figure at 5.5%.

It’s safe to say that a return to rates in the 3% range is unlikely to occur any time soon. At least in the short term, then, buyers will have to continue exploring various financing programs to help cut mortgage costs.A drop in interest rates would likely lead to price increases this year. But with many experts predicting 2024 will be an even stronger market, 2023 could still provide solid investment opportunities for buyers, despite the relatively high mortgage rates.

What this means for buyers

More immediately, buyers who couldn’t compete in the spring 2022 market may have a shot now. They generally will have more time to prepare their offers and face a less competitive environment. However, they will have to factor current interest rates and inflationary living expenses into their budgets.

What this means for sellers

As buyers grapple with various affordability issues, sellers can expect homes will take longer to sell. Pricing correctly will be even more crucial than usual. Sellers should brace themselves for the return of contingencies (e.g., home inspections) in negotiations.