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How Will Disinflation Impact the Current Housing Market?

The housing market is continually evolving in 2023 as inflation weighs heavily on both home buyers’ and sellers’ minds. With rates coming down and the traditionally hot spring market fast approaching, many are left wondering if they should buy, sell, or hold onto their property until things settle down.

While some are predicting the housing market to shift from a seller’s market to a buyer’s in 2023, it is important that any individual looking to enter the housing market this year be aware of what experts are saying when it comes to inflation’s impact on home prices. Below is an in-depth look at how inflation rates might impact the 2023 housing market and what it means for your real estate actions.

How Bad Is/Was Inflation?

In 2022, inflation soared, with the U.S. Bureau of Labor and Statistics clocking it in June 2022 at 9.1%. Although numbers have begun to creep down to around 6.5% in January 2023 (numbers are generally released two months after they are recorded), it is still a long way from where things were prior to the pandemic at around 1.4% in 2020.

While the downward trend was bumped in January from the high in June 2022, increasing by around half a percent, it is expected that this is a small bump and will level out quickly. This is supported in a statement by David Berson—Chief U.S. Economist—who states he “expects inflation will continue to moderate over 2023.” Regardless, this caused mortgage rates to increase at about the same percentage as now the current rate for a 30-year fixed is around 6.5% as well.

With this new inflation number, it is expected that the Fed will raise the prime lending rate yet again. Currently, inflation is at 6.5%, and the Fed’s goal is to bring it down to 2-3%. Unemployment is at historically low numbers, and the average consumer is not cutting back on purchasing or borrowing at this point. Consumers are still apt to borrow, with things like credit card interest rates, car loans, business loans, and mortgage lending all still high compared to pre-pandemic numbers.

Is Inflation the Trend Line for the Housing Market in 2023?

Housing prices, after years of increasing, are starting to take a downturn. Roughly half of the country is seeing lower home prices when priced per square foot. Where housing prices will go in 2023 largely depends on where interest rates will go throughout the year. It is predicted that interest rates will continue to fall throughout 2023. Housing inventory is low compared to demand, so even if there is a small downturn in prices, it is expected to not be that noticeable since there is still a shortage of new housing, especially for the first-time buyer.

Nadia Evangelou, senior economist and director for the National Association of Realtors, states, “It seems we have already reached the bottom of the low home sales activity.” She expects the market to turn around in 2023 from where it was in 2022 and to rebound in 2024.

What to Know if You are Looking to Sell or Buy Property During Disinflation?

You might be considering whether you should sell your home right away or wait until the economy flattens out as a result of the housing market being battered by inflation. While things continue to cool off, it is important that you consider your selling motives. Considering that rates are falling, it might be advisable to pull the trigger sooner rather than later; however, with the springtime being a traditionally hot time for real estate sales, sellers might have a hard time closing the deal as the slight increase in supply could shift deals more in favor of the buyer. Consider doing some renovations and planning out which would have the highest ROI. This is always a good place to start when looking to stand out amongst the crowd and avoid making price reductions.

For buyers, especially first-timers, it’s important to keep an eye out for new opportunities as repeat buyers will be listing their current properties during this normally busy spring market. This has led to more homes opening up, especially those that were newly built or more expensive. With the increase in competition, it could open up possibilities to buy at prices you couldn’t beforehand.

New Opportunities in the Housing Market

The fluctuation of inflation numbers will continue to serve as the guiding hand for the housing market in 2023, and those looking to enter should be aware of what impacts those might be to best ensure that they are making the most out of the opportunities presented.

As a partner at Tully Rinckey PLLC, Darren helps New Yorkers with real estate transactions and the preparation of estate planning documents. He has extensive experience in real estate transactions and works with buyers, lenders, and sellers to get the best possible outcome for all. He can be reached at or at (888)-529-4543.

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