The real estate market is always shifting and evolving. The Federal Reserve has signaled ongoing rate hikes to fight inflation. Higher mortgage rates will impact affordability, especially for first-time home buyers. To compensate, buyers may shift focus to lower-priced homes. Sellers may also be motivated to list sooner before rates climb further. Be ready to act quickly when financing deals in a rising rate environment.
Ongoing price appreciation
Home prices surged nationwide over the past two years due to limited supply and high demand. Tight inventory will continue driving rapid price appreciation in many areas for the foreseeable future. Home values are forecast to increase at least 5% annually. Sellers will still wield pricing power in most markets. Buyers should brace for bidding wars on popular listings. While inventory will remain low compared to historical norms, new supply is forecast to increase heading into the spring selling season. Rising mortgage rates and economic uncertainty may motivate more homeowners to cash out equity by listing. New construction may also rebound. Buyers could see slightly improved selection, though still a seller’s market in most regions.
Investor activity increases
With home values up and mortgage rates rising, more small-scale and institutional investors are projected to enter the Iowa Real Estate MLS market in the coming year. Expect increased competition from investors for starter homes, distressed properties, and multi-family buildings. As the for-sale market stays red hot, demand for rental housing keeps reaching new highs while vacancy rates scrape the bottom. Skyrocketing rents are forecast to climb further in the new year. Landlords will gain pricing power. Tenants may endure bidding wars and struggle to find affordable rentals in some cities.
Suburban shift persists
The pandemic-driven suburban shift looks to continue, as remote work provides location flexibility. House hunters in 2023 will keep seeking spacious homes, yards, and affordable properties in suburbs and small towns versus overpriced cities. Commercial development and residents with higher incomes will follow. After years of extreme weather, more home buyers are seeking properties resilient to climate change effects in 2023. Energy efficiency, backup power, fire safety, flood prevention, and sustainability will become bigger decision factors. Eco-friendly features like solar power, EV charging, and low-water landscaping will win favor with buyers.
Tech-forward homes in demand
Homes outfitted with cutting-edge technology will generate increased interest from forward-looking buyers in the coming year. Smart home devices, high-speed internet, advanced appliances, electric vehicle chargers, integrated home office spaces, and other tech features will command higher prices. Privacy and security systems will also prove popular. An improving supply chain and easing labor constraints set the stage for new home construction to accelerate again after pulling back in 2022. More shovel-ready lots and pent-up buyer demand will motivate developers to ramp up the building. Newly built homes with modern designs and efficiently used spaces will appeal to buyers. Home sales and development targeted toward the needs of active adult communities are poised for healthy growth. Aging baby boomers are fueling demand for low-maintenance residences, convenience features, community amenities, and access to services. Developers will cater to active adults with new construction in 2023.
