3 Housing Market Predictions for May

So far, 2023 is proving to be a pretty difficult year to buy a home. Not only are property values still elevated, but mortgage rates are high as well.

In April, the U.S. housing market suffered from low inventory, and many buyers were forced to sit tight and wait for more listings to arrive, all the while grappling with borrowing rates stuck in the mid-6% range. But will May be any different? Here's what buyers and sellers should anticipate.

1. Mortgage rates probably won't change much in May

As of late April, the average 30-year mortgage rate was around 6.4%, according to Freddie Mac. We could see rates move around a bit in May, but they're unlikely to change drastically. This means rates could drop to the lower 6% range or even move closer to 7%.

All told, borrowers should assume that the days of record-low mortgage rates seen during the pandemic are far behind us. And if you're looking to purchase a home, you might have to get comfortable with the idea of paying somewhere between 6% and 7% interest on a mortgage loan. That said, if you're able to afford the payments on a 15-year loan, you might manage to lock in a lower rate.

2. Housing inventory will probably remain sluggish

As of the end of March, there were about 980,000 unsold homes on the market nationally, according to the National Association of Realtors (NAR). That represents a 2.6-month supply.

It normally takes a four- to six-month supply of homes to equalize the housing market. So from a supply-demand standpoint, sellers continue to have the upper hand. That makes May a potentially good time to sell.

Even though mortgage rates are up, there are still people who are looking to buy. So if you've been thinking of selling your home, you may want to do so before more properties hit the market and your competition increases.

For buyers, low inventory is apt to be a challenge in May. We could see inventory pick up modestly during the month, but let's remember that a lot of people these days are not motivated to sell because doing so could mean signing a new mortgage at a higher rate than what they want.

3. Home prices will remain elevated

The NAR reports that the median existing home sold for $375,700 in March. Home prices are unlikely to drop significantly in May because inventory is still so low. And because of this, sellers won't necessarily be motivated to slash their prices.

If you're looking to buy a home, you'll need to run the numbers carefully to make sure you can afford one based on today's prices and borrowing rates. Of course, you can always try to negotiate a listing price downward, and some sellers may be willing to work with you. But all told, you should largely expect to pay up for a home this spring.

Should you buy or sell a home in May?

Buying a home might prove challenging in May, but that doesn't mean you shouldn't purchase one if you can swing it financially. The reality is that buyers may be stuck in this current holding pattern of high prices, elevated mortgage rates, and low inventory for many months before market conditions start to shift. And it only makes sense to put off a home purchase for so long.

Sellers, on the other hand, still have a prime opportunity to walk away with nice profits. So listing a home in May is a move that might pay off nicely.