Source: Delaware Housing Market

The housing market in Delaware is going through a significant change. In September 2022, the median selling price went up by 10.2% from the same month the year before, but the number of homes sold went down by 20%.

At 7.08%, mortgage rates are at their highest level in 20 years. As homes sit on the market for longer and longer, sellers are lowering the prices they want. Buyers now have more power in the market.

Now that rising mortgage rates and the possibility of a recession are putting pressure on the housing market, buyers and homeowners are asking a common question: Will the Delaware housing market crash in 2023? 

Here are some things we think will happen:

1. Mortgage rates will increase even more.

Experts say that ongoing inflation, the likelihood of a recession, and geopolitical worries will cause mortgage rates to go up even more. Financial market participants think that the Fed will raise its target Fed funds rate by 175 to 200 basis points from where it is now.

This means that the average rates for 30-year and 15-year mortgages will be $8.50 and $7.70, respectively. Some analysts say that the rates for 30-year and 15-year mortgages could drop to 6% and 5.25%, respectively, if the Federal Reserve can keep inflation under control and slow down its sudden rate hikes.

2. Home sales could go down.

No doubt, rising mortgage rates will significantly affect home sales in 2023. How things are going now, rising interest rates could cause a 10% drop in home sales next year. 

No longer will home listings be taken off the market faster than before. Also, the average number of days on the market is 30 days, but that number could go up to 35 days or more in the next year.

3. The prices of homes won't go down.

Some analysts say that home prices won't go down in 2023 because there won't be enough homes for sale. Others think that when interest rates go up, prices will return to where they are now. 

Unaffordability is expected to cause home prices to drop by 5% to 10%. As the Fed tries to stop inflation, mortgage rates are going up.

4. There won't be many homes for sale or rent.

Before the 2008 housing market crash, there were enough homes on the market to last for 13 months. We barely have enough to last three months, about half of what we need. 

Homeowners aren't likely to trade in their 3% mortgage for a new house with a 7% loan unless they have to. As a result, there are likely to be few homes available. 

Few analysts think that the number of houses on the market will grow as loan rates rise and houses become more expensive.

5. Home affordability will remain stable.

Housing prices will stay about the same. Even if home prices keep decreasing, they won't be enough to compensate for the higher interest rate. 

As a result, mortgage payments will continue to be high, and homes may seem like they cost more than they do. Some people are hopeful that inflationary pressures will ease and mortgage rates will go down next year. This would make buyers feel less pressured.

Final Thoughts

Mortgage rates will continue to go up in 2023, but they will go back down to 5.5% or 6% within two years. Over the next five years, the value of homes will go up by 15% to 25%.

Next year will be an excellent time to buy. Many sellers waiting for the market to improve will give in and increase their stock.

We expect a market where neither the buyer nor the seller has a monopoly as long as there aren't too many homes for sale. Long term, though, it will still be a seller's market.