Money Management

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.

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Travel can be expensive. Here’s how to carve out more money to make it happen. 

If travel is a big goal of yours for 2023, you’re no doubt in good company. But the unfortunate reality is that travel costs have soared in recent years, largely due to an uptick in demand. And so a trip that might’ve cost you $2,000 in 2019 might cost $2,500 or more in 2023.

The good news, though, is that there are steps you can take to boost your 2023 travel budget. Here are three worth focusing on.

1. Cut back on expenses that are less important to you

Maybe you currently spend $40 a month on streaming services and $80 a month on takeout. And maybe you spend another $100 a month on rideshares on top of that.

There’s nothing wrong with spending money on conveniences and entertainment if they make you happy and you can afford them. But if travel is more important to you than any of those things, then you may want to cut back and divert more of your money to saving for the trips you have on your list.

2. Get yourself a side hustle

Living costs are still very high due to inflation, so your paycheck may not be going as far as it used to. If you’re hoping to carve out more money for travel in 2023, a side hustle could be your ticket to making it happen.

The beauty of that second gig is that your earnings won’t be earmarked for bills like utilities and rent payments. So you may have the option to take all of your extra money (minus what you owe the IRS in taxes) and use it to pad your travel budget.

3. Use your credit cards strategically

The everyday purchases you make on your credit cards, like groceries and gas, could put a fair amount of cash back in your pocket. And that’s money you may be able to use to take more trips.

In fact, a good bet is to review your various credit cards’ rewards programs at the start of the year to see which ones you should be using for which types of purchases. Accidentally using a card that only gives you 2% back at the pump could leave you with less money if you have a card that offers 3% cash back for fill-ups.

Also, if you think you’ll be doing a lot of air travel in 2023, it could pay to apply for a travel rewards credit card if you don’t have one already. These cards commonly come loaded with money-saving benefits like free checked bags, which you normally get charged for on domestic flights. Knowing you won’t have to cover the cost of baggage could leave you with more wiggle room to spend money on other aspects of travel — for example, upgrading your hotel room for a night or paying for an extra tour.

Getting out and traveling can be a wonderful, eye-opening experience. Employ these tips so money, or a lack thereof, doesn’t stop you from seeing the top places on your list in 2023.

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It’s a practice you may want to pause for a while. 

There are several benefits you might enjoy the next time you apply for a new credit card. For one thing, another credit card will add to your spending limit, giving you more flexibility.

Also, many credit cards give new account holders an opportunity to snag a sign-up bonus. Generally, if you meet a certain spending requirement within a preset period of time, you’ll get a lump of cash back or reward points you can use to your benefit.

But while it’s easy to see why you might be tempted to apply for a new credit card, in some cases, it pays to hold off on doing so. And if these situations apply to you, you might actually want to avoid getting a new credit card for all of 2023.

1. You already have credit card debt

If you’re sitting on a pretty large pile of credit card debt already, then it’s probably best that you avoid applying for any new cards. After all, you don’t want the temptation to keep spending and potentially add to your debt load.

Now that said, there is one exception to this rule. It could make sense to apply for a balance transfer card and move your existing credit card balances onto it.

If your new card comes with a 0% introductory APR, you’ll get a reprieve from accruing interest while you chip away at your debt. But if you don’t qualify for a balance transfer offer, or if one of these offers doesn’t make sense for you (say, because of the fees involved), then you may just want to tell yourself you won’t be applying for any new credit cards for the foreseeable future.

2. You’re planning to apply for a mortgage

The higher your credit score when you apply for a mortgage, the lower an interest rate you can anticipate. And seeing as how you may be looking to borrow a large sum of money, that’s important.

Meanwhile, any time you apply for a new loan or credit card, your credit score gets a mild ding due to having a hard inquiry done on your credit report. In many cases, that minor hit won’t have much of an impact. But you never know if it might push your credit score just below the threshold needed to snag the most competitive interest rate a given mortgage lender is offering. And you’re better off not taking that chance.

3. You don’t want the temptation to spend more

Maybe you don’t have any credit card debt and have always managed to pay off your balances in full every month. Even so, getting another credit card means having more opportunity to spend money. If you’re trying to curb your spending and boost your savings balance, you may not want that temptation.

Even if you’re someone who normally applies for one or two new credit cards every year, in these situations, holding off makes a lot of sense. And so you may have to decide that 2023 will be the year when you won’t apply for a new credit card at all.

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Tackle this task before any other financial matter. 

If you’re hoping to take advantage of the new year by getting your financial house in order, good for you. January is a great time to focus on improving your finances, and that way, you’ll have a full 12 months ahead of you to meet your goals for the year. But while you may have different financial items you want to tackle in 2023, this one move should take priority over all others.

Build yourself a financial safety net

Financial experts have been warning for much of the second half of 2022 that a recession could strike in 2023. If that were to happen, it could result in a massive uptick in unemployment claims. And that could put a lot of people in a tough financial position.

That’s why the most important financial move you can make in 2023 is to build yourself an emergency fund, or boost your existing savings. Ideally, you want enough money in your savings account to cover a minimum of three months of essential expenses — and that’s really the minimum. For better protection, it pays to have enough money in your savings to cover six months of bills, or even more.

Now you may be thinking, “I have credit card debt. Shouldn’t I focus on paying that off first, and then work on my emergency savings?”

Paying off credit card debt is a great goal, and an important one, too. The sooner you pay off your credit cards, the less money you’ll lose to interest.

But here’s why building an emergency fund should still come first. If you don’t have money in savings to fall back on and you find yourself out of a job, or with an unplanned expense on your hands, you’ll put yourself in the position of having to rack up more debt. And at that point, it might be more expensive to borrow than it was when you took on the credit card debt you’re paying off now.

So all told, you should make your emergency fund your first priority, even if you have other worthwhile goals you’re hoping to achieve in 2023, like starting to fund a retirement plan or paying off your car. This isn’t to say you should cross your other goals off your list. Rather, build or grow that emergency fund first, and then focus on tackling the remaining items on your list.

You always need protection

If you’re convinced the recent recession warnings have been overblown, then you may not be so motivated to focus on your emergency fund in 2023. But remember, there doesn’t have to be a widespread economic crisis for your savings to come in handy. You could lose your job even at a time when the broad economy is doing just fine. And you never know when you might run into a home or car repair out of nowhere.

That’s why you should prioritize your emergency fund regardless of how economic conditions play out. There’s a chance the economy won’t tank in 2023, but that doesn’t let you off the hook when it comes to building savings.

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There are other items you may want to check off your list first. 

Many people who own homes carry a mortgage for many years. In fact, it’s common to spend 30 years (or more) paying off a home.

A lot of people start out with a 30-year mortgage and refinance it to another 30-year loan at some point down the line. So all told, many people who buy homes in their 20s and 30s just manage to get their mortgages paid off in time for retirement. And some don’t even manage to enter retirement free of housing debt.

If you owe money on a mortgage, you may be eager to pay it off ahead of schedule. And you’re not alone. In a recent Principal survey, 34% of respondents list paying off a mortgage as a top financial goal. But here’s why you may want other items to top your list.

It’s a matter of limited upside

The main benefit of paying off a mortgage early is saving money on interest. But if you have a fairly low interest rate on your mortgage, then paying it off early may not make sense.

In fact, a lot of people refinanced their mortgages back in mid-2020 and 2021, when borrowing rates were super low. If you did the same, you may be paying somewhere in the ballpark of 3% on your mortgage right now, assuming you have a 30-year loan.

But if you have a high-yield savings account, you may find you’re earning the equivalent amount of interest on your money, if not more. So in that case, it makes sense to stick to your regular mortgage payment schedule and not pump extra money into your home loan.

Similarly, let’s say you’re paying 3% interest on your mortgage but are a shrewd investor whose brokerage account generally delivers an average yearly 10% return. In that case, it makes much more sense to put extra money into investments rather than put it into a mortgage that isn’t very expensive.

Plus, don’t forget that if you itemize on your tax return (as opposed to claiming the standard deduction), you can deduct the cost of mortgage interest for a nice tax break. So that’s just one added reason not to worry so much about paying off a mortgage early.

Work toward other goals first

For some people, shedding a mortgage isn’t just a matter of saving money on interest — it’s a matter of not having a monthly debt payment hanging over their heads. There’s definitely a benefit to that.

But remember, mortgage debt is something a lot of people have and carry for years. And if your mortgage has a low interest rate attached to it, then you’re generally better off using your spare cash for other purposes, like funding a retirement savings plan.

Of course, if you happen to be stuck with a higher interest rate on your mortgage and come into extra money (say, you’re promoted and get a huge salary bump), then an early mortgage payoff could make sense. But otherwise, you may want to use your extra money for other goals and accept that your mortgage might be with you for many years.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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