A historical rise in interest rates, properties depreciating, lower sales, and an overcrowded market. What’s going on, and will the market rebound? In this article, we’ll talk about what this means from all 3 parties involved in real estate: buyers, sellers, and renters.
The COVID-19 pandemic marked both a peak and major reversal in the trend of the housing market. For much of the world, we have seen countless years of “up only”, but that market started to level out after the pandemic started, and now we have been seeing a decline. What does this mean for 2023?
One of the largest issues (especially for North America) has been the rising interest rates in what has often been seen as a sad attempt at levelling inflation. The rise of interest rates has impacted all home owners on variable or expired fixed rates for their home mortgages, raising payments significantly and making homes much less affordable. Up until November of 2022, home prices in some parts of the world had fallen up to 27% from their peak – in a traditional market, that percentage decline that fast is not normal.
So when will the bottom come? Though we don’t have a direct answer, we have a strong expectation that when interest rates stop climbing, property will level out and enter a reversal phase. This is expected to happened at some point in the first quarter of 2023, but that time will also mark a major opportunity period.
Though homebuyers are often scared to purchase homes in markets like this, the period we are in is that of finding the bottom for real estate; we don’t expect to catch the exact bottom, but the bottom phase as a whole has historically been a great time to start looking for entries. Affordability will be at its best, and though interest rates may be high, they should begin to decline over the course of 2023 – if you can afford a mortgage with the high rates, your payments would actually decline as prices climb again and interest rates come down!
A majority of countries may just begin to bottom out in 2023, but some countries could see growth and others further decline as well. However, the general consensus is for smaller movements, which generally means that a reversal (to the upside) will be in motion.
*Crown Analysis does not have any financial advisors on our team, and our posts are in no way financial advice. Invest and trade at your own risk, our publications are simply an educational resource.