Do we know 100% for sure? By using vital statistics, market history and insight into market data, we can look into what most likely will happen to the real estate market in 2023.
According to NAR’s (National Association of Realtors) Annual Forecast Summit, fewer homeowners will be willing to sell and this will prevent home prices from falling, although price appreciation will slow to more “normal” levels. Key takeaways: Mortgage rates and home prices are expected to moderate, sales will slow because of persistent inventory shortages, and buying opportunities will be there.
What We Saw in 2022: As 2022 closes out, we saw inflation soar to a 40-year high, rapidly rising mortgage interest rates that slowed down the pandemic-era selling and buying madness. According to the forecast to close 2022 (and shown on the graph here), existing home sales will be down 16.2% from 2021, making this the lowest level since 2014. New home sales will be down 17% which number equates to returning to pre-pandemic levels.
Key Stats For 2023: the Annual Forecast shows home sales will fall by 6.8% (7%) in 2023 compared to 2022. One of the main reasons being homeowners have an existing low interest rate and don’t want a higher one, once they were to buy their next residence, as well as economic uncertainty. NAR’s chief economist Lawrence Yun sees hopeful signs for next year, with half of the U.S. experience small price gains and half the U.S. see slight price declines. He added the SF Bay Area could see drops of 10% to 15% in 2023.
The Good News? The Consumer Price Index this past Tuesday shows inflation is slowing down, prompting the Federal Reserve to start slowing the hikes to the benchmark interest rate. Yun also expects the mortgage rates to settle to 5.7% by the end of 2023. So if inflation continues to slow and rates stabilize, more buyers will be able to come back to purchasing.
What Should You Do Now? If you can, look for really good buys where the seller needs to sell and selling price can be negotiated. Even houses that only need “cosmetic” repairs can be good targets. Can you get the seller to pay for some of your closing costs? Remember, once buyers believe everything is “better” the wave of buyers may be back, pushing up prices, multiple offers and less concessions given by sellers (like the first 6 months of 2022). You need an experienced Realtor that understands the micro markets, a “good” target property with upside potential, and what issues to avoid. This market will not be for the meek and uninformed.
