Will More Homes Hit the Real Estate Market in 2023?

More people could end up selling -- but not necessarily for the best reasons.

There's a reason so many people have struggled to buy a home over the past two years. Since the latter part of 2020, the real estate market has sorely lacked inventory. And while housing supply has picked up to some degree in recent months, there's still a notable shortage of available homes.

The National Association of Realtors reports that as of the end of September, there were 1.25 million homes available for sale. That represents a 3.2-month supply. But it normally takes a minimum of a 4-month supply to meet buyer demand, and sometimes as much as a 6-month supply. And so right now, sellers still have an upper hand due to that lack of inventory.

In fact, low housing inventory has led to soaring home prices over the past couple of years. And when we combine high prices with rising mortgage rates, it makes for a very challenging market.

But will housing inventory pick up in 2023? There's reason to believe it could. But the circumstances leading to that may not be ideal.

More homeowners may be driven to sell

It's easy to see why the real estate market lacked inventory starting in the second half of 2020. At that point, we were deep in the throes of a major world health crisis, and the last thing people needed was the upheaval of listing a home, moving, and having strangers traipse around inside their properties.

But we're in a very different place these days. And it's fair to say that pandemic-related concerns probably aren't a major factor for a lot of would-be sellers. And so housing inventory could increase in 2023 by virtue of that alone.

But that's not the only reason we could see more homes hit the market. For some, affordability might force homeowners' hands.

Inflation has been wreaking havoc on consumers for months on end. And we may see an uptick in listings in 2023 when homeowners reach the point where they can no longer afford their mortgages.

Furthermore, there's talk of a recession hitting in the new year, and many economists seem convinced that it's a sure thing. To be clear, we might manage to avoid a widespread economic downturn. But if things do take a turn for the worse, more people may be driven out of their homes due to unemployment. And that could lead to an increase in property listings.

Should you plan for an uptick in housing inventory?

If a lack of available homes has hindered your home buying plans, you may have better luck in the new year -- but not necessarily for the best reason.

Ultimately, it's hard to predict what housing inventory will look like once 2023 kicks into gear. But if more homes do hit the market, there's a good chance buyers will enjoy the cool-down they've been waiting for. And even if mortgage rates remain high in 2023 like they are today, lower home prices might make it possible for more buyers to finally take the leap into property ownership.