Predicting the 2023 Housing Market

As it’s been said about predicting the future:

-Prediction is very difficult, especially if it’s about the future.

-Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window.

With those sage adages in mind, what can one anticipate about the housing market future?

With the rising interest rates and inflation, is there ANY good news out there for those seeking

to buy or sell a home in 2023? Well, there’s another wise saying that states: You will see what

you are looking for, therefore look for what you hope to see. So…Let’s take a peek at some

positive and optimistic possibilities for this upcoming year (coupled with a few nuggets of real-

time data and information).

Increased Inventory is Expected YET….:

While the inventory of houses on the market has increased, the for-sale level is predicted to fall

short of the 2019 average by 15%. Couple this with the fact that new construction has slowed

and lags behind new household growth. Why is this seen as a positive? It means that buyers

may regain some leveraging power in negotiations when purchasing a home. Sellers are

becoming more open to accepting concessions from the buyer. This allows for home shoppers

to take back some control when exploring the real estate landscape, while escaping the

extreme competition that has been seen over the past few years.

Rent Growth Continues:

Again, why is this a positive? Let’s explore this a bit…rental vacancies remain quite low (around

6%) and rent growth is forecast to rise to 6.3% in the next several months. It appears that there

is a strong rental market in larger urban areas. If you are in a position to invest in a rental

property, now would be a prime time to take that plunge and earn additional income.

RealTrends cited a forecast from Redfin that predicts (larger) investors will purchase about 24%

fewer homes in 2023 than in 2022, as the investor business model of buying low and selling or

renting high is less feasible now that it is more costly to borrow money. While investor purchase

activity may cool off, experts and real estate agents anticipate an uptick in first time landlord

activity in the coming year. Perhaps you currently own a home yet are looking to purchase a

new home. If you are in a financial position to do so, you might consider renting your current

home as a means to offset the mortgage on your new purchase. Rents are expected to set a

new high in 2023 which can mean more money in your pocket as the investor or landlord.

Plus…these higher rents could also translate into renters opting to purchase rather than renting

which also allows them to leverage tax break advantages.

Housing Affordability Stabilizes:

As employee remote work options increase, there has been an increase in home price growth in

smaller, affordable markets and tapping the brakes on home price growth in some of the most

expensive metros. This will reduce the price premium on homes in some of the highest cost

areas and give a boost to prices on homes in lower-cost markets, flattening the difference

between them after several years of moving in the opposite direction. This trend will be

especially pronounced if companies expand operations in smaller markets leading to higher

local wages that can support higher home prices (Realtor.com). “Buyers sitting on the sidelines

today in anticipation of lower prices tomorrow may end up disappointed,” says Neda Navab,

President at Compass. RealTrends ‘Prediction 1” states, “The affordability crisis will stabilize as

home prices post the first year-over-year decrease in a over a decade and mortgage rates

decline, settling somewhere in the mid-5% to low-6% range.

Success for Sellers Continues:

While 2023 may be tipped more favorably toward the buyer, sellers can quickly adapt to this

change by making a few minor adjustments. Accepting contingencies, paying for inspections,

making repairs, paying closing costs, and allowing more flexibility on the timing of closing could

just be the ticket to a quick(er) home sale. Of course, locating a reputable real estate agent who

is familiar with the market is a MAJOR tool in a seller’s toolbelt! Another positive indicator for

sellers is that according to the National Multifamily Housing Council and the National

Apartment Association, multifamily construction hit a historic high this past year. New

construction is focused more heavily on this multi-family arena which means less competition

for current home-owners with new build constructions.

Not Another 2008 Financial Crisis:

Will the housing market crash or will it ‘correct’ itself? According to Rick Sharga, executive vice

president of market intelligence at ATTOM Date, “We’re estimating about a 5% drop nationally.

Some markets, believe it or not, will probably see prices continue to increase.” Other financial

experts feel that homeowners are in a more secure position than those from the 2008 financial

crisis which means the likelihood of another crash is low. “Homeowner equity is at the highest

level it’s been in the past several decades, so homeowners have a lot of value in their home,”

says Nicole Bachaud, an economist at Zillow. Bauchaud also notes, “There are a lot more

regulations and restrictions in the mortgage market that make it a lot stronger, and less volatile

and less risky, than it was in the market after 2008.”

Regional Healthy Housing Markets:

RealTrends ‘Prediction 2” reads, “Housing markets in the Midwest and Northeast will hold up

best as the overall housing market cools.” “As affordability has become the key driver of both

supply and demand in the market, places that still feature reasonable prices are already seeing

momentum shift their way, and should have the healthiest housing markets in 2023,” Zillow’s

prediction report stated.

Buying With Friends and Family Will Gain Momentum:

RealTrends lists this as their ‘Prediction 5’. They note that industry seers are predicting that it

will become increasingly more common to see groups of friends or family members purchase a

property together. They notice this trend starting to take off in the second home and

investment property markets, as extended families or groups of friends band together to

purchase a vacation destination property that they all have access to and can collect vacation

rental or Airbnb income from when not in use by an owner.

So, you see…it’s not all ‘doom and gloom’ for the 2023 housing market.

Our motto at Sandi Downing Real Estate is

“providing exceptional client services”