What’s up With the Real Estate Housing Market — Should I Rent or Buy in 2023?

3 min readAug 7, 2023

Key takeaways

House prices haven’t dropped much due to low inventory, and mortgage rates are still near 7%
Rental prices are also on the up, having risen 2.4% this year so far
Whether renting or buying is best for you depends on your financial situation

The U.S. housing market is a head-scratcher at the moment, making it hard to know if renting or buying a home is best. As both options present a different challenge, we’ve identified some of the market factors you should be aware of before making a decision. Here’s the latest.

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What’s happening with the real estate market?

We’re seeing an unusual phenomenon in the housing market: even though interest rates are higher than in decades, house prices haven’t collapsed. Sure, there’s been a drop — Redfin found the typical U.S. house price in June was $383,000, which is only $4,000 less than the all-time high from June 2022.

The average 30-year fixed-term mortgage rate is closer to 7%, yet in May 2023, house prices were 45% higher than in January 2020. Why? One of the reasons is that those who took out loans during a record-low interest rate period are unwilling to move any time soon, so there’s less inventory on the market.

Another factor is that house-building simply hasn’t kept up with demand, having first plummeted during the 2008 financial crisis. That’s slowly turning around — in May, groundbreaking on U.S. single-family homebuilding projects surged to the highest levels in 30 years — but until then, there’s a shortfall in homes.

All in all, it’s not a fantastic time to buy a home compared to even just 18 months ago.

Should I buy or rent a home in 2023?

If you were thinking of buying a home, but it feels out of reach right now, you’re not alone. In its annual State of the Nation’s Housing report, Harvard’s Joint Centre for Housing Studies revealed that potentially 2.4 million would-be homeowners have been priced out of the market due to the cost of living increase.

However, rentals have also increased in price at the same time. Zillow’s June rental report found rent prices have risen 2.4% in the first half of 2023, with the average asking rent in the U.S. now over $2,000 monthly. It’s a risk factor for keeping inflation sticky.

There won’t be much relief until the Fed reverses the monetary tightening policy. Fed chair Jerome Powell hasn’t indicated when that might be, but the markets believe the U.S. is done with rate increases for now.

The bottom line

Whether you rent or buy entirely depends on your circumstances. If it’s possible, it could be worth waiting out the high interest rates — but given rentals have increased too, there’s no straight answer to whether one is better than the other. Always get professional advice if you’re considering a big move.

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