3 Housing Market Predictions for January

Buying or selling a home? Here's what you need to know.

Maybe you've been saving money all year for a down payment on a home, and you're hoping to kick off your house hunting in January. Or maybe you've been toying with the idea of selling your home and you've decided that once the holidays are over, you're going to put it on the market.

Whether you're a buyer or a seller, it's important to have a clear sense of what the housing market looks like. And while we can't say for sure what the real estate market has in store for January, there's reason to believe things won't change much from December. As such, here are a few things you can anticipate.

1. Inventory will remain limited

As of late October, there were only 1.22 million housing units for sale. That's not a very large number, though. In fact, it only represents a 3.3-month supply of homes, and it can take a 6-month supply to create an equalized housing market where there are enough homes to fully meet buyer demand.

Meanwhile, December is hardly a popular time to list a home. It's when people are busy celebrating the holidays and checking year-end financial moves off of their to-do lists. And so there's a good chance buyers won't have much more inventory to choose from in January than they did at the midpoint of fall.

That's not the best news, because the less inventory there is, the more sellers can charge for their homes. If you're a seller, though, it means you may want to capitalize on limited competition by listing your home at the very start of 2023.

2. Mortgage rates will still be high

The Federal Reserve recently said that due to a moderate cooldown on the inflation front, it plans to slow its interest rate hikes. That's good news not just for mortgage borrowers, but consumers as a whole.

However, that doesn't mean we should expect mortgage rates to plunge in January. While mortgage rates could drop slightly, they're unlikely to change drastically.

3. Sellers might see lower profits -- but they'll most likely profit nonetheless

Home price gains have been slowing over the past few months, and there's a good chance that will continue into January. After all, it's unlikely that buyer demand will surge during the first month of the year, especially since winter isn't a particularly popular time to purchase a home and mortgage rates aren't sitting at very appealing levels.

But to be clear, smaller home price gains doesn't mean no gains. If you're looking to sell your home in January, you might still walk away with a nice profit -- just maybe not the same enormous profit you would've seen months ago.

Let's see how the first month of the year shakes out

It's unlikely that January will be a major turning point for the real estate market. It's not a month when listings tend to pick up, and it's not usually a popular month for buyer activity to increase. But either way, it will be interesting to see what January has in store for buyers and sellers alike. And no matter which category you fall into, be sure to keep track of market trends so you can capitalize on changes that work to your benefit.