San Antonio Real Estate Market Forecast 2023

If you’re interested in the San Antonio real estate market, you are in good company. This beautiful, modern city is one of the most populous in the U.S. thanks to the city’s ability to maintain a stable economy and attract newcomers. However, those who are interested in buying or selling San Antonio real estate face uncertainty due to the turbulent flux of economic conditions affecting the real estate market on a national level. Read on to gain insight into where the market is, where it has been, and where it is likely going in 2023.

The city of San Antonio has seen quite a lot of growth in recent decades, thanks largely to the influx of working individuals and families moving to San Antonio. As a large city with a robust economy, San Antonio always has an active and competitive real estate market, but it has been especially active in recent years. The San Antonio real estate market has seen explosive interest during the two years since the first quarter of 2020, as seen in this market report from the National Association of Realtors (NAR). While the unusually high demand and enormous capital appreciation seen in recent years are unlikely to be sustainable in the long term, it remains to be seen how and when the market will go back to normal. The market appears to have already slowed down somewhat by early 2023 due to several significant factors.

Mortgage rates are an important indicator to watch in 2023. As you can see from this Federal Reserve chart, American home buyers enjoyed over a decade of average mortgage rates below 5% for the most part prior to 2022. In 2022, however, average rates for a 30-year fixed-rate mortgage climbed to around 7%, falling slightly back down to about 6% as of January 2023. Looking further back on the chart, it is clear that this level is nothing extreme from a historical point of view, but it is still painful for today’s home buyers, especially first-time buyers and those with a tighter budget.

 

When mortgage rates rise, home buyers pay more for financing, and thus, they have less capital available for the actual home purchase. This can cause buyers to hold out for lower-priced homes and possibly defer their purchases until conditions are better. But what drives up mortgage rates? The most straightforward answer is interest rates, or more specifically, the Federal Reserve’s federal funds rate. Since the federal funds rate basically sets the minimum interest rates that banks will pay for capital, almost all other interest rates in the U.S. economy rise in tandem with the federal funds rate. Mortgage rates are no exception.

 

There is one more critical piece to the puzzle of what is causing mortgage rates to rise, and that’s inflation. Inflation is the primary reason for the Federal Reserve to raise interest rates, and as long as inflation remains high, the Fed is likely to keep raising rates. Fortunately, it looks as though the pace of inflation is finally beginning to slow, which is a sign of the clouds breaking for investors who are hoping for mortgage rates to come down. Due to the appearance of slowing inflation, the Fed is likely to slow down rate hikes in 2023. Don’t expect mortgage rates to go super low again in 2023, but we are likely to see rates level off and perhaps even dip a little.

Inventory levels for available homes are an important aspect of the market to examine. If you’ve been involved in the San Antonio real estate market in recent years, you are probably aware of how tight the market has been. Inventory has been well below historical levels in recent years, as evident in this chart of the active listing count in the San Antonio area. Inventory levels hit rock bottom two times, around April 2021 and March 2022, reflecting the seasonal upsurge in real estate interest that tends to take place every spring. However, active listing inventory levels rebounded over the course of 2022, approaching normal levels.

 

With inventory rising, look for home prices to ease down in San Antonio in 2023. However, inventory levels do not appear to be rising above normal historical levels, so this factor alone will not cause a significant downturn in the real estate market.

The San Antonio real estate market faces some hurdles in 2023, thanks to rising mortgage rates and inventory levels driving down home prices as inflation and economic uncertainties challenge buyers. However, the forecast for 2023 is not all doom and gloom. Although mortgage rates are a headwind for buyers, rising inventory and falling prices should help to improve affordability for many real estate seekers. This will especially be the case if the pace of interest rate hikes slows down and mortgage rates stop climbing. Another thing to consider is that prices have been so high in recent years that any decline or even a pause in price action would be beneficial to homebuyers.

 

If you are looking to buy or sell a San Antonio home in 2023, don’t let market conditions stop you. Talk to a realtor about the great opportunities that are still out there.

As you consider what the market holds going forward, keep in mind that if you are considering moving to San Antonio, you can do so in any market if you have a pro by your side. You can make your first move today by talking to a top-tier San Antonio real estate agent. Beth Lockwood is a top local realtor specializing in San Antonio luxury homes. As a San Antonio native, long-time resident, and member of the San Antonio Board of Realtors®, her portfolio includes some of the most amazing properties in San Antonio, New Braunfels, Boerne, and the surrounding area. Contact Beth Lockwood to learn more about the changing market and see what San Antonio has to offer.