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2023 Real Estate Trends: What You Need to Know

With so much going on around the country—and everything getting more expensive—you may wonder how current events are affecting the housing market. Questions like, “Will we see more skyrocketing home values?” and “How will the real estate market shake out in this economy?”

So, let’s dive in and answer those questions (and some other important ones)! Whether you’re selling, buying or staying put, here are the 2023 real estate trends to watch.

Real Estate Trend #1: Home Inventory Is Low but Growing

The real estate market has been dealing with low inventory for a while now. That means there aren’t enough homes for sale to meet buyer demand.

Here’s how things are looking these days: Inventory has been moving upward since April 2023, but the number of homes for sale was still down 4% year over year at the end of September.1 So, while inventory is still growing, it’s not happening very quickly—and it’s still nowhere close to pre-COVID levels.

Let’s talk about how this affects you if you’re planning to buy or sell sometime soon.

What Low Inventory Means for Buyers

A low inventory means you need to be on your toes when you go house hunting because the best homes will get snatched up fast. In September 2023, homes spent an average of 48 days on the real estate market—two weeks less than typical pre-2020 levels.2

That means you don’t have time to sit around and think when you’re shopping for a home—you’ve got to make a decision pretty quickly.  

If you want to find a good home in this slim market, here are a few of my favorite pieces of advice:

  • Sacrifice some wants. If you can’t find the “perfect” home, be willing to give up some nice-to-haves for your must-haves. Find the least expensive home in the best neighborhood you can afford and upgrade over time.
  • Expand your search. If the location where you plan to buy is too competitive, you might be surprised at what you can find in a less popular neighborhood. Working with a real estate agent who really knows the area is the best way to find a home that fits your budget and lifestyle.
  • Get preapproved ASAP. To buy yourself some extra time, get preapproved for a mortgage before you go house hunting—it’s a must in any market. And it’s even more important when home supply is low. Think about it: If two people make an offer on a house, and only one of them is preapproved, the seller probably won’t want to wait around for the other potential buyer to jump through those hoops to see if they can actually get a mortgage.

What Low Inventory Means for Sellers

When you’re selling a home, low inventory means less competition! If your home is in a great location or has features that buyers want, you can probably expect multiple offers coming your way.

On the other hand, higher mortgage interest rates have knocked some buyers out of the market (more on that later). So if the house you’re selling isn’t the most appealing house on the block, you’ll still get offers—but probably fewer offers than a house like yours would’ve received in the last couple of years.

And—this is important—make sure you know where you’ll be living next before you sell. If you’re buying a new home after your current home is sold, there’s no guarantee that the new owner will allow you to stay there until you decide (although you could make that part of the buying agreement).

Real Estate Trend #2: Annual Home Values Are Still Rising

Yes, home prices are still going up year over year, though the speed has definitely slowed down. The national median home price for active listings increased to $429,500 in September 2023, but that was only a growth of 0.41% compared to September 2022.3 

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And by the way, since there’s still strong buyer demand and a shortage of homes for sale, prices aren’t going to plummet. They’re dipping a bit from month to month (which is a normal seasonal trend for prices after they peak in early summer)—but they’ll still be higher than they were at the start of this year.

So, if you’re a seller, that should put a smile on your face.

What Higher Prices Mean for Buyers

If you’re going to buy a home in this expensive market, you absolutely have to know how much house you can really afford. Commit to staying within that budget no matter what—don’t cave to the pressure to buy because you’re tired of watching competitors pluck good homes off the market.

I know waiting on the right home that fits into your budget can get frustrating. But you’ll be glad you did it when your home is a blessing instead of a big headache of a mortgage payment you can’t afford!

To feel confident about buying a home this year, follow these tips:

  • Limit your house payment to no more than 25% of your monthly take-home pay. This payment includes principal, interest, property tax, home insurance, homeowners association (HOA) fees and, if your down payment is lower than 20%, private mortgage insurance (PMI)—an extra fee added to your mortgage to protect your lender (not you) in case you don’t make payments.
  • Save a big down payment. Ideally, you’ll want to save a down payment of at least 20% to avoid PMI. For first-time home buyers, a smaller down payment like 5% to 10% is okay too—but then you’ll have to pay PMI. Saving a big down payment is possible, you guys! You just have to stay patient and focused. Who knows, you might even be able to save a five-figure down payment (or more) by this time next year.
  • Choose a 15-year fixed-rate conventional mortgage. The best home loan (and the only one I ever recommend) is a 15-year fixed-rate mortgage. Expensive rip-offs like the 30-year mortgage, FHA, VA, USDA and adjustable-rate mortgages will charge you tens of thousands of dollars extra in interest and fees and keep you in debt for decades. Stay away from those!

Once you’re ready to buy, you’ll need start working with an experienced real estate agent who’s an expert in your local area. You may be tempted to go the DIY route, but that’s not a good idea. A good agent will help you navigate the ins and outs of the buying process and take a lot of stress (and complicated paperwork!) off your shoulders.

You can find a quality agent through our RamseyTrusted program. Our incredible team here at Ramsey vets all the pros in our network to make sure they’re the best of the best.

Connect with a RamseyTrusted agent today!

What Higher Prices Mean for Sellers

Higher home prices mean you’ll likely make a profit if you’re planning to sell sometime soon. And that’s great news because you’ll really want that extra money when buying your next home. To get the best offer on your home, work with an experienced agent who really knows what’s up in your local real estate market.

And be sure to wait for the right offer. Some buyers may try to lowball you. If you aren’t in a hurry to move, wait for an offer that gives you the most profit. It’s true: The person who’s least desperate always has the upper hand when negotiating.

With the right agent, taking on the housing market can be easy.

Buy or sell your home with an agent the Ramsey team trusts.

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Real Estate Trend #3: Mortgage Interest Rates Are Higher

The average mortgage interest rate (the interest fee lenders charge as a percentage of your loan amount) was lower than it’s ever been in 2021. But it’s gone up since then.

Because the Federal Reserve has continued to periodically raise interest rates in 2023, the average rate for a 15-year fixed-rate mortgage jumped from 5.14% in February to 6.89% in October—the highest it’s been in over 15 years! Meanwhile, the average rate for a 30-year fixed-rate mortgage reached 7.57% in October.4

By the way, that’s a big reason I only recommend 15-year mortgages: They tend to have lower rates than 30-year mortgages, and since they end 15 years sooner, you’ll pay less interest over time. That’s a one-two punch when it comes to saving money!

If you want to refinance or get a mortgage from a lender who’s RamseyTrusted and actually cares about helping you pay off your home fast, talk to our friends at Churchill Mortgage.

What Higher Rates Mean for Buyers

Higher interest rates definitely make it harder to afford buying a house, so don’t feel pressure to buy a house you aren’t ready for. On the other hand, don’t let high interest rates scare you out of buying a home if you’re debt free with both a full emergency fund and a strong down payment saved up.

Just make sure you stick to the 25% rule for your monthly payment (see Real Estate Trend #2), and you’ll be in great shape.

What Higher Rates Mean for Sellers

Higher interest rates mean fewer buyers will be motivated to buy your home. So while houses were selling super fast a couple years ago, your house might sit on the market a little longer now. Prepare to be patient while waiting for offers.

Real Estate Trend #4: Online Real Estate Services Are Growing

I’m sure you’ve heard of real estate services like Zillow that let you browse or list homes for sale online, but did you know online services now offer to buy and sell your house for you? Yep, and they’re becoming more popular. Let’s look at a few of the most common programs out there.

Third-Party Buyers

Here’s how the new iBuying trend works: You tell companies like Opendoor about the house you want to sell. They buy it from you, spend some of their own money to make repairs and improvements, then resell at a higher price while handling all the home processing stuff like inspections, repairs and showings.

These companies promise you less hassle and charge you pretty much the same as an agent commission for selling costs—but there’s a catch. Virtually every iBuyer will give you way less money for your home than it’s actually worth since their whole goal is to resell it for a profit. Some even include an additional service fee.

And worst of all, you don’t get the benefit of working with a top-notch agent who actually knows the current real estate market in your area and could sell your home for more money. If it sounds a little impersonal, that’s because it is.

Using a “Virtual” Agent

Hybrid services like Redfin try to reduce traditional agent commissions by handling things online. This gives you some of the services you’d get if you worked with an agent, but for a fraction of the cost. Think of it as a middle ground between selling with an agent and selling by yourself.

When selling a home, be wary of any middle ground. Your home is your biggest asset, and you usually get what you pay for. Having a dedicated real estate agent on your side through the whole process is worth the extra money (and helps you avoid any extra headaches). Why go virtual when the experience of a real person is so much better?

Mobile or Online Closings

In related news, digital technology also makes it easier to handle virtual documents needed for buying and selling. For example, many home transactions now use electronic signature apps and remote online notarization to simplify the process. That means you could buy or sell a house this year without getting out of your car or ever changing out of your PJs.

You’ll see more of these trendy digital services pop up in real estate in 2024 and beyond. Just remember not to get swept up in every hot new trend. Use your brain, your budget and a great professional real estate agent to make sure you’re getting the best deal on the right house for you.

Real Estate Trend #5: Risky Buying Options Are More Accessible

Okay, let’s cover some of the other trendy ways to purchase a home. But listen, even though they’re gaining popularity, stay away from them!

Rent-to-Own

If you want to buy a home but can’t quite afford it yet, some sellers like Divvy offer a rent-to-own agreement. In this type of deal, you agree to rent the home for a while—anywhere from several months to several years—before becoming the owner.

The so-called plus side of rent-to-own is that you can get into a house fast without waiting to save a down payment, and you don’t have to qualify for a mortgage right away.

But here’s the problem with rent to own: It makes your rent more expensive because some of your monthly payment will go toward future homeownership. With rent prices increasing across the country, you don’t want to pay more than you have to.

Plus, if you decide you don’t want to buy the house or something happens to break your contract (like you don’t get approved for the mortgage), you won’t get all those extra payments back. And you might have to cover repairs and maintenance yourself, even while renting. Talk about a bad deal!

The bottom line is this: Rent-to-own just isn’t a good way to get into a house, so don’t get taken in.

If you can’t afford a home yet, that’s totally okay. Keep renting and saving for that down payment. It’ll happen sooner than you think if you’re willing to work at it!

Down Payment Loans

Another risky real estate trend to avoid is taking out a personal loan to fund a down payment, which is basically the same as buying a home with 0% down. In this scenario, you borrow the entire cost of the house from two different companies at two different interest rates (which means twice as many headaches).

Purchasing a home with no money down is never a good idea. Thankfully, not many mortgage lenders allow you to do this—and it can even disqualify you from getting the mortgage you want.

What if I’m Not Buying or Selling a Home This Year?

If you aren’t planning to buy or sell anytime soon, here are the real estate trends you should watch for now:

1. Your equity will grow, but not by much.

Most experts believe home prices will continue rising in 2024, though not by a whole lot. Freddie Mac believes home prices will go up by 0.8% in 2024.5 And the National Association of Realtors (NAR) thinks price growth will increase by 2.6%.6

That means not a whole lot will change for you if you’re a current homeowner who’s planning to stay put. Home prices will stay pretty much the same, so your equity won’t change drastically. It may increase a little, which will help with your net worth. Keep an eye on how much your home is worth to make sure your equity (what your home is worth minus how much you owe on it) is going up.

2. A real estate market crash looks unlikely.

With home prices growing a little slower in 2023, you might be wondering if the housing market could collapse. Well, you guys, there’s no need to panic—the housing market is not going to collapse.

While mortgage rates are higher than they’ve been in many years, the NAR predicts rates will peak in 2023 and may even go down, which will bring demand up. But there’s still a relatively low supply of home listings, which the NAR says will stay that way in 2024. This keeps home buying competitive and home prices steady.

3. Regardless of your neighborhood, buyers are interested.

Since home prices have gone way up over the past few years, some buyers may be less choosy. In fact, determined ones might be willing to consider neighborhoods that don’t have easy access to highways or aren’t close to a big city. If you think you live in an unpopular neighborhood or believe your home isn’t what buyers are looking for, think again. Now may be the perfect time to consider selling your house.

You Are in Control!

Before we close out our look at real estate trends, I want to make sure you understand something super important: You should never make a decision about buying or selling a house only based on real estate trends. Really!

Real estate trends and stats like the ones we looked at can give you good context on what’s going on in the market, but you should make your real estate decisions based on how prepared you are in your money situation.

So, even in a buyer’s market, you should only buy a house if you’re debt-free with a full emergency fund and a strong down payment, like we talked about earlier. And you should only sell a house when you’ve got equity on your side, you have a new place to live, and you can afford the move—even if you’re in a seller’s market.

Remember: You are in control of your financial future, no matter what the housing market is like!

Take Control of Real Estate Trends With an Agent

Whether you’re selling or buying, you can take advantage of the current real estate market trends by partnering with an experienced RamseyTrusted agent. Our team will match you with top-performing agents we recommend in your area.

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Frequently Asked Questions

The current real estate trends going into 2023 are all about the market slowing down and approaching something normal. Year-over-year home values are still rising, and 2023 will be a year of pretty slow growth. Home inventory is still low, but the data indicates that it’ll continue to grow throughout 2023.

There are also some rising trends to watch out for. Buying and selling real estate using online services is starting to get more popular, but it’s definitely not smart (hint: hiring a real estate agent is). And risky buying options like rent-to-own are (unfortunately) more accessible than ever.

Yes. With both a growing supply of houses and an overall demand for housing coming down due to higher interest rates, the market looks to be slowing down to something resembling normal compared to the white-hot performance of 2021 and 2022.  Think of the coming year as a regular, manageable fire instead of a gasoline-fueled blaze. Still hot, just not as hot.

As a result, experts are anticipating that home prices—which had year-over-year percentage jumps in the double digits the last couple years—will go up at a more normal rate in 2023.

Yep. No matter what’s going on in the market, real estate is always valuable. (As Mark Twain said, “Buy land, they’re not making it anymore.”) And the value of real estate is always going up—even if it’s not by the huge percentages we saw in 2021 and 2022.

If you’re already maxing out your tax-advantaged retirement accounts and are looking for a way to earn some extra income, increase your net worth, (and can do it without going into debt), it’s a great time to invest.

But remember—that doesn’t mean it’s not going to require some hard work on your end. Owning real estate can be time consuming and might cost more money than you’re planning on spending. So make sure you fully understand what you need to invest before taking it on.

Depending on which expert you ask, home values with either go up or down by a fraction of a percentage point. That means the actual value will pretty much stay the same in 2023.

Not likely. While there have been small drops in prices due to the higher interest rates, they’re still higher than they were last year, and experts don’t think they’ll go down anytime soon.

Real estate experts believe interest rates will peak in 2023 and then slowly start to go down again.

No. In the Real Estate Reality Check, Dave Ramsey explained that the current real estate market is nothing like the housing bubble that burst in 2007 and 2008. For one thing, the current supply of houses is way lower than it was 15 years ago. Second, there’s still super high demand for houses despite the market slowing down a bit. Going into 2023, there are millions more households in America than there were back then, which leads to far more buyers chasing too few houses. A housing bubble, like the one in 2007 and 2008, has the opposite problem in all those areas.

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Rachel Cruze

About the author

Rachel Cruze

Rachel Cruze is a #1 New York Times bestselling author, financial expert, and host of The Rachel Cruze Show. Rachel writes and speaks on personal finances, budgeting, investing and money trends. As a co-host of The Ramsey Show, America’s second-largest talk radio show, Rachel reaches millions of weekly listeners with her personal finance advice. She has appeared on Good Morning America and Fox News and has been featured in publications such as Time, Real Simple and Women’s Health magazines. Through her shows, books, syndicated columns and speaking events, Rachel shares fun, practical ways to take control of your money and create a life you love. Learn More.

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