It’s been a roller-coaster couple of years, with rock-bottom interest rates and tight inventory giving way to rising rates (double today what they were a year ago) and an inventory that’s still too tight for comfort. Experts says a housing market correction is underway, with the rates leveling off and home prices coming down just a bit.
The median existing-home sales price was up 2.3% to $366,900 in December of 2022 compared with a year ago, says the National Association of Realtors (NAR). Home prices nationwide are looking to be more favorable for buyers, with many markets throughout the country seeing lower prices compared with last year.
This is good news for military families in particular, for whom personal finances can be tight due to frequent moves, lower income and iffy employment prospects for spouses. But the horizon is looking brighter as we head into 2023, not just for military families, but for many other segments of the population as well.
Let’s take a look at some real estate trends that you should know about.
Optimism Among Service Members and Veterans
Despite the rocky rates and affordability outlook, about three quarters of current service members (71%) are planning to buy a home in the next five years, according to Veterans United Home Loans. On top of that, three in 10 current service members and 15% of veterans are planning on buying in 2023.
As the market starts making a shift back towards buyers, younger service members and veterans will continue to benefit from VA loans that preclude the need for stellar credit and a down payment – two factors that still plague their civilian counterparts, says Forbes.
However, those benefits have taken a hit in the last two years for service members and veterans, who couldn’t compete in the market thanks to all-cash offers and bidding wars with conventional buyers. This will start to shift as we head further into 2023, with an increase in government lending and lower rates.
That’s good news for military buyers. After skyrocketing to a 20-year high of 7% in early November 2022, mortgage rates have started sliding in recent weeks — a trend that is expected to continue as we make our way through the year.
Additionally, with a softening market will come a build-up of inventory this spring.
Slowdown in Home Sales
While only time will tell if the feds will continue to raise mortgage rates or not, one thing most experts seems to agree on is a slowdown in home sales for 2023. If rates do creep higher, home sales could drop by 10% or more, perhaps up to 15%. Bankrate says the number of sales will continue to slow, hovering around 4.5 million, with new-home sales at 600,000.
Hand in hand with that will likely be a slow-down in how long homes sit on the market. Last year homes were selling in the first weekend of hitting the MLS, barely giving anyone a chance to scoop up their dream home, let alone something they could just see themselves settling for. You won’t see as many listings going at such a lightning-fast pace, with days on the market climbing toward normal levels recently (30 days or more). That’s about two to three times the levels seen in 2022.
In the San Antonio real estate market in particular, the sentiment is that this market remains a strong one, and could continue in that direction provided the jobs outlook stays healthy and rates don’t increase. The San Antonio Report says this region could be moving away from a strong seller’s market to one that is more balanced.
Despite falling home sales over the last eight months and median home values on the decline, real estate in this area compares very well with the rest of the U.S. markets. San Antonio stacks up well against other U.S. cities. In fact, the National Association of Realtors named San Antonio among the top 10 to watch in 2023.
Nationally, there won’t be a huge change in home prices this year. Half of the country will experience small price gains, and the other half will experience slight price declines, says Realtor Magazine. Because mortgage rates are the lifeblood driving home sales, what the feds decide to do next with those rates will be very telling. If inflation is indeed cooling, the Federal Reserve is expected to slow those hikes.
In short, 2023 is on track to regain normalcy in a market that has been top-heavy since 2020 where we have “ping-ponged” between an aggressive market and a cooling market, according to Money. With more economic stability comes increased balance.
Flat Home Prices
With things tentatively looking up for real estate, home prices won’t necessarily drop too much in 2023 due to inventory that’s still historically low. As a result, pricing will remain relatively flat, increasing by just one percentage point.
There are many potential buyers out there waiting in the wings to enter the market, and are ready to pounce as the market begins its slow shift from a seller-is-king outlook to house-hunters-now-get-their-shot.
With the projected lower rates, you will see these buyers emerge, led by young adults who want to become homeowners offset by limited inventory and strong credit quality.
The bottom line is that the housing market will remain lukewarm for 2023, with tepid demands and limited inventory to balance things out. For some segments of the population, such as military families who are having a tough go already when it comes to affordability, it will become even more important to partner with a real estate agent skilled in this area to guide them through.
The one disadvantage for military families is that they often don’t have a choice when and where they relocate, unlike conventional buyers who often times have the luxury of waiting out the market and taking their time. Plus, the frenzy of the market over the last two years has pitted service members and vets with VA loans against civilians with cash or conventional loans.
Analysts say this year brings hope, as military families will not compete with as many bidding wars and cash offers, and homes will linger for longer on the market, perhaps accompanied by a price reduction or two. This may give military families a better shot at putting in a winning offer that may have been shot down right out of the gate last year.
What to Do in Light of These Trends
No matter where the industry is heading, it’s still a fact that house hunting is a challenge for anyone, let alone military families.
Here are a few things to keep in mind.
Seek Creative Funding
There are many creative ways to fund your home purchase, such as federal, local, state, and non-profit down payment assistance programs. You may also be eligible for grants and loans provided you meet borrower requirements, such as veteran status or healthcare provider.
Also, while VA loans are an excellent funding option, it’s not the only one out there. There are alternatives that may allow you to take out multiple loans or have one loan with more affordable terms. If you can put down a hefty down payment, a conventional mortgage is always an attractive choice.
Reconsider Housing Type
While you may have had your eye on a single-family home, the prices in your area may be too cost prohibitive for this dream to come true. And with no say in where you relocate for the military, you may have to look at alternatives such as townhouses, condos, or duplexes. This could give you more square footage and even garage space that you may not have been able to afford with a single-family house, says Military.com. Maybe you can get away with a one-car garage instead of two, or perhaps your two small children could share a room for now.
Assemble a Team of Real Estate Professionals You Can Trust
Hunting for a house during times of low inventory and uncertain interest rates requires professional help. Ask your family, friends, co-workers and neighbors for recommendations on real estate agents and mortgage lenders that they trust. Military buyers and sellers tend to be extremely loyal to their real estate agents, particularly when their whole business model is centered around finding housing and jobs for military members and their families.
Connect With Homefront United
Homefront United is proud to help military families successfully navigate their relocations with the help of a highly experienced military move advisory team. Our network of real estate agents can also help military spouses find careers in real estate. If you’ve just gotten your next assignment and need to relocate quickly, contact us today for a free, no-obligation consultation at (210) 756-3553.