Will the housing market heat up this summer?

2023 has been an unpredictable year in the housing market. After the upheaval of the pandemic and the low interest rates we saw over the last two years, it seemed like a return to normal was coming this year. And one of the ways the market was going to get back to normal was that the hot spring selling season was going to return.

But that never really happened.

High rates and a stubbornly low number of homes for sale cooled off hopes for a hot market this past spring. Upheaval in the banking sector scared a lot of folks away from making big purchases, as well.

Now the question is, is that behind us? And what can we expect as the weather gets warmer?

We’ll take a look and provide a preview, and we’ll start by looking at the three most important points any homebuyer pays attention to: mortgage rates, housing inventory and home prices.

Will mortgage rates keep rising with the temps?

There are so many factors that affect mortgage rates, and that makes it hard to predict if they are going to go down or up. One of the most notable factors is what the Federal Reserve is doing with its federal funds rate, the interest rate their charge banks to borrow money. On May 3rd, Fed Chairman Jerome Powell a 0.25% increase in their rate, the tenth rate hike in a row.

However, along with this announcement, the Fed released a statement that suggested that this may, may, MAY be the last rate hike for a while. The statement was couched in terms that made it clear that their next decision in regards to rate hikes would depend on how the rest of the economy performed. But what this signals is that the Fed thinks that they might be getting inflation under control, and if they believe they have, they may be done raising rates.

It's important to note that the Fed’s rate is not the same as the mortgage rate you get quoted when you’re shopping for a loan. But they can be related. And the Fed’s new stance on their rates is good news for borrowers.

Lawrence Yun, Chief Economist at the National Association of Realtors® (NAR), was recently quoted saying that “in the second half of the year… more favorable mortgage rates are expected.” NAR forecasts that rates for a 30-year fixed mortgage will drop to 6.0% by the end of the year and to 5.6% in 2024. This is a softening of the NAR position at the beginning of the year, when they projected a rate in the mid-5% range to end this year. That just goes to show you how much can change over a few months.

Bottom line: There’s reason to be optimistic that mortgage rates may come down, but we’ve seen many unexpected events affect mortgage rates. It’s so unpredictable. So, if you find a rate that you can afford for a home you love, jump on it. Ask your loan officer about what programs we have, like Same Day Mortgage and PowerBid Approval, to help your offer stand out in case you get into a bidding war.

Also, with inventory low, you may have to widen your sights for what you want in a home. Buying and then renovating a fixer upper or a home lacking one of your must-haves, like a second bathroom, can be a great solution to low inventory. Talk to a loan officer about our renovation loan program and create more inventory for yourself.

What to expect with home prices this summer

With inventory rising, the question then becomes, are home prices going down at the same rate that inventory is going up? Looking over the last year gives us a hint at where they’ll go this summer.

June of 2022 was the high point of national average home prices, and they dropped steadily until they hit a low January. Then they started rising again. If that trend continues, expect to see a rise in home prices in the summer, even if inventory continues to grow.

Bottom line: Home prices are down from their high of last summer, and inventory is on the way up. Those are good indicators for a homebuyer. But don’t wait as home prices could keep going up this summer. And remember that you could use a temporary buydown like our Rate Reduce program to help make the first few years of your mortgage more affordable.

How hot will it get?

That’s the question every summer, and we’re not just talking about afternoons around the pool. Because of the factors we just went through, it’s hard to predict how hot this summer’s housing market will get, but it’s safe to say that it will not be as bonkers as it was last summer.

It really will depend on how many homes are for sale in your desired area. That will affect home prices and also how many buyers are likely to be in the market. Another factor is mortgage rates, obviously. We’ve seen a clear correlation, when mortgage rates go down, even by a tenth of a percentage point, mortgage loan applications go up.

The secret to making the most out of this summer is to be prepared to be the best buyer you can be, work closely with a real estate agent and get pre-approved from an expert loan officer. Then you’ll be ready for whatever surprises the summer has in store.