What does the homebuying market look like in 2023?
A recent WSFS Mortgage Study gauged how potential homebuyers feel about the market considering inflation and higher interest rates.
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The homebuying market has seen some ebbs and flows over the past three years since the pandemic.
However, while the focus has been on the interest rates and selling prices, a key factor overlooked during this time is less competition.
This is due to the fact that the interest rates and selling prices have simply priced many out of the market.
As the spring 2023 homebuying season looms, WSFS Mortgage recently conducted a study of 1,032 Greater Philadelphia and Delaware region consumers and 1,000 consumers nationally between the ages of 25 and 65, to gauge potential homebuyers’ outlook heading into the season.
The new WSFS Mortgage Study found that while 28% of Greater Philadelphia and Delaware region residents are currently discouraged from searching for a new home due to the economic climate, about one-third still plan to look for a new home this year.
The top three reasons cited for holding off on their home search this year were home prices (65%), mortgage rates (57%), and recession concerns (41%).
“These are important factors to consider for homebuyers who were previously shut out of the homebuying market due to historic levels of demand driven by low rates and people’s desire for more space during and after the pandemic,” said Jeffrey M. Ruben, President of WSFS Mortgage, in a statement.
However, about 42% of those who are likely to search for or buy a new home this year believe there are available homes they want, and 37% expect mortgage interest rates to decrease.
“While we aren’t going to see mortgage rates at those levels anytime soon, there are several indicators that rates will stabilize. Those who continued saving toward a home despite their previous frustrations may be rewarded this year as they face less competition for the homes they want,” Ruben added.
Saving has been a challenge for many.
About 66% of regional residents said that higher everyday prices are making it hard for them to save for a new home or rental. Meanwhile, about 60% said that current rent payments make saving to buy a home difficult.
Plans for current homebuyers vary.
About 55% plan to use the home equity they’ve built up, while 32% are planning to use it within the next year. Of those who plan to use their home equity, about 36% plan to use it to renovate or remodel their home, 35% plan to use it to purchase another home, and 26% plan to use their home equity to pay off non-mortgage debts.
Homeowners of color are more inclined to use their equity than white homeowners (63% to 51%); however, the majority of homeowners overall cite buying a home as a top reason to use their equity.
As potential homebuyers continue to weigh their options upon the dawn of the upcoming homebuying season, homebuying assistance programs are always a good option.
However, there are disparities within their utilization.
About 45% of people of color report having considered homebuyer assistance, compared to 26% of white buyers.
“While there are many local, state and federal programs designed to help homebuyers achieve this dream, coming up with upfront costs, such as down payment and closing expenses, can be challenging,” said Ruben. “While it is important for homebuyers to do their research, it is equally, if not more, important that their lender work closely with them to identify programs their clients may be eligible for.”
The WSFS Bank Down Payment and Neighborhood Opportunity programs are some options that WSFS provides to help homebuyers with affordability to achieve their dream of homeownership.