Since the pandemic began, housing prices have gone up, home shortages have increased and interest rates have risen. Some changes have been intentional, like the Fed combating inflation with raised rates, but others have been outside the realm of predictability. As we near the end of 2022, some of these pandemic-driven factors that created unprecedented market conditions for more than two years are starting to fade. 

The market is cooling down. Historically, seasonal declines have been a predicted trend in Northeastern markets, however this year there are more factors influencing buyer activity. While buyer demand still far outweighs market supply, affordability concerns are the main discernable factor today. Despite mortgage rates having dropped over the past several weeks, buyer activity is lower than it has been in recent years and homebuilders have slowed new construction projects, furthering supply concerns of affordable housing.

What is ahead for 2023? We are in an unprecedented market shift. This is not the recession of 2008, however we have reached the pivotal point of pandemic-related factors and affordability concerns where a market correction is required. As we are already seeing evidence of market corrections occurring outside of normal seasonality trends, we can expect this trend to continue into the new year. For buyers, mortgage rates will be the primary consideration. As a bulk of prospective purchasers sit on the sidelines during this transitional period, the resulting silver lining could be increases in housing supply. With a softened buyer demand, this also puts pressure on sellers to lower prices.

Nevertheless, the market will continue to remain in the seller’s favor due to tight inventory. Buyer demand has not lessened, only buyer activity due to affordability concerns. This means while the competition remains high, pandemic price growth and waived contingencies will no longer be the market condition.

Have questions about what this means for you and your home?

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