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Housing Market Predictions for 2023 in Fairfield CT

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What will the housing market look like in 2023?

Are mortgage rates going to decrease? Will home prices fall? Should I wait to buy or sell real estate in this market? These are all questions that potential buyers and sellers are contemplating, and the one main question is: What are the current predictions for the housing market in 2023?

The housing market in 2022 was labeled as the year of a market correction. As the national headlines of the housing market across the country were focused on increases in supply and drops in home prices, that was NOT our local experience here in Fairfield. Fairfield experienced record low inventory and price stability in home values with strong closing prices. The most prominent fact regarding real estate is that it is LOCAL and understanding your local market is imperative when making a decision about buying or selling real estate.

The year 2022 for the local housing market was defined by rapidly rising mortgage rates and lack of supply. Fairfield single family homes experienced another year of single family median home price appreciation by 12.1%, low number of days on the market with an average of 44 days, and low inventory. There were 156 homes on the market at the end of December 2022, down 21.6% compared to December 2021. We are still in a seller’s market. When inventory comes to the market, priced appropriately, it is absorbed by the market. Multiple offers are still occurring and is especially true for move-in-ready homes in sought after locations.

The 2023 national housing market predictions are full of uncertainty. Even top economists and experts in the field vary in their opinion related to mortgage interest rates and home prices. The direction of the market will depend on inventory, inflation and the economy.

What is the mortgage interest rate prediction for 2023?

The Federal Reserve developed an aggressive policy this year to try to lower inflation with an increase in the federal funds rate monthly. This impacts long term mortgage rates which more than doubled since the beginning of 2022. It is safe to say that if inflation is high, mortgage rates will follow along. But if inflation continues to fall, mortgage rates will likely respond. We are starting to see early signs inflation is easing as we ended 2022, but we are certainly not in the clear yet. Inflation is still something to watch in 2023. Experts are factoring all of this into their mortgage rate forecasts for this year. Utilizing market predictions from Freddie Mac, Fannie Mae, and NAR (the National Association of Realtors), the current average forecast is a range that’s between 5.5% and 6.5%. This is a moving target as economic forces can change throughout 2023.

Will home prices fall?

The answer to this question is solely based on supply and demand. With the continued lack of supply, home prices are still expected to increase at a decelerated rate. We have seen in 2022 a 21.6% drop in inventory, and a 70% drop since the beginning of the pandemic from December 2019. This has been the main force of home price appreciation.
If there are not enough homes on the market, and demand is still strong, home prices will rise. In Fairfield, median home prices increased 12.1% in 2022 and 7.4% in 2021. While home prices are stabilizing in the area due to rising interest rates and inflationary issues, the demand is still strong. We don’t expect home prices to see the double digit increases over the last few years, but we are anticipating growth. Millennials are on average 33 years old and looking for their first home, Gen Z is entering the market, sellers want to downsize or upgrade, and lifestyle changes are all driving buyers to the Fairfield market.

“The housing market, once adjusted to the new normal of higher mortgage rates, will benefit from continued strong demographic driven demand relative to overall, long-run shortage of supply,” said Mark Fleming, Chief Economist, First American.

Fairfield is one of those demographic-driven demand locations. During the pandemic, many residents in New York state, New York City and New Jersey saw Connecticut as a viable option to live in the suburbs and enjoy all that Fairfield has to offer – from the easy commutable location to the community, beaches, amenities and highly rated school system. The demand continues to be strong for home ownership in our town.

The 2023 housing market in Fairfield will be a transitional year and it will come down to supply and demand. Inventory will be the main driver of the local market. With the low levels of inventory, home prices will continue to be strong even with the volatility of mortgage rates. Home prices are expected to continue to be strong further confirms that real estate is still a viable investment option now and in the future! Call me to start the process today (203) 650-6870

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