Experts Say Home Prices Could Plunge by 20% Next Year -- Here's How to Take Advantage

It's good news, so set yourself up to benefit from it.

There's a reason so many potential home buyers have been struggling in today's housing market. Not only are home prices still elevated, but mortgage rates have risen sharply since the start of the year, putting buyers in a position where they're being forced to spend even more to finance a home purchase.

But while we don't know what 2023 has in store for mortgage rates, some experts think that based on recent trends, we could get a reprieve on the home price front. In fact, Ian Shepherdson, chief economist with Pantheon Macroeconomics, thinks home prices could drop as much as 20% in the course of 2023. And that could open the door to a buying opportunity.

Of course, you'll want to put yourself in the best position possible to capitalize on that opportunity. Here's how.

1. Boost your credit score

The higher your credit score, the more trustworthy you might seem as a mortgage borrower. And so if your score could use a lift, now's a good time to work on that. A higher credit score won't just increase your chances of getting approved for a mortgage -- it might also result in a more competitive borrowing rate on that loan.

One of the best ways to boost your credit score is to pay all bills on time. You should also check your credit report for errors -- and correct mistakes that may be painting an unfavorable picture of your credit history (such as delinquent debts that don't belong to you).

2. Lower your debt load

The more debt you have relative to your income, the more hesitant a mortgage lender might be to approve your application. That's why it pays to work on whittling down your debt, and the best place to start is generally your credit card balances. Not only are those likely costing you the most money in interest, but paying off credit card debt could also help your credit score improve (whereas paying off a personal loan may be a good thing, but it won't necessarily bring your credit score up).

3. Boost your down payment funds

Home prices might come down quite a bit in 2023. But it still pays to go in with as large a down payment as possible.

Right now, inflation is making it difficult for a lot of people to boost their savings. But if you're able to trim some spending and carve out more funds for a home purchase, you may have an easier time buying in the coming year.

And if cutting back on spending isn't an option, look at a side hustle. The gig economy is thriving these days, and there's lots of opportunity to pick up a second job.

A major decline in home prices could be a wonderful thing for buyers -- especially those who have been trying to navigate the housing market for months on end to no avail. But it pays to put yourself in a great position to jump on those lower home prices. Aim to boost your credit, shed some debt, and squeeze out more money to put down on a home.