With rising interest rates and stabilization following the pandemic, people were quick to predict more affordable homes in 2023, reversing the trend set for the last few years. But William Collins, with his extensive experience in the real estate industry, has several warnings for those eyeing new home purchases as investments or ways to move out of a rental situation.

Home Price Growth is Subsiding, But Still on the Rise

Overall, home prices are in flux. Taken as a whole, American home prices are still rising in 2023, by about 0.3%. But that median growth doesn’t tell us much about the market as a whole. That small increase indicates that investors should study pricing changes from market to market. In some locations, prices are starting to fall by significant levels, making them new prospects for investments or a lower-cost first-time home. Other regions are still seeing very steady price growth.

Overall, 2023 is a bit early on in the correction to expect big changes, and William Collins suggests caution before putting too many expectations on a single region or trend. Overall, while slowdowns are evident, a big crash or bubble burst isn’t expected.

Listing Increases Aren’t Always a Good Metric

Many real estate markets are also seeing increased listings. It can be tempting to regard that as good news for those who want to purchase new properties, but listings are only part of the story. William Collins cautions against putting too much emphasis on what that may mean. As interest rates have risen, listings may have increased simply because time on the market has increased, not because overall inventory has seen a significant rise.

In fact, many areas are still struggling with low inventory issues even as their listings increase. This is compounded by some slowdowns seen in residential construction during the first quarter of 2023, indicating that new inventory may not be making an impact in 2023 (although William Collins is optimistic about the coming years).

William Collins Notes that Foreclosures are Still Low

Some expected foreclosures to rise quickly following the end of the moratorium that was enacted during the height of the COVID pandemic. Investors and landowners were interested in the possibility of picking up foreclosures at prices significantly lower than the market average. While this may be possible in some situations, don’t expect a glut of foreclosures to hit the market this time. Indeed, foreclosures continue to be significantly lower than pre-pandemic levels despite an uptick in January 2023, and owners are dealing with foreclosures more effectively. A new wave is unlikely to arrive, and current foreclosures aren’t likely to create widespread market opportunities.

The Rental Market is Facing Changes, Too

Thinking about depending on rental income to offset a new mortgage? It may be a good idea to wait until after 2023. Rental rates are facing issues of their own, and in many cases are starting to look unsustainable. Rent is likely to start falling sometime in 2023, and the final results are still uncertain. Landlords should be patient during this time.