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Navigate the real estate industry’s online turmoil and armchair quarterbacks with expert predictions from Windermere Real Estate’s Chief Economist Matthew Gardner.
1. No housing bubble
Mortgage rates will skyrocket in 2022, coupled with a significant rise in home prices, some suggesting a mortgage restructuring. housing bubble But it wasn’t far from the truth.
Over the past few years, house prices have outperformed themselves due to a perfect storm of massive pandemic-induced demand and historically low mortgage rates. We expect it to fall, but we don’t expect house prices to fall systematically.
moreover, financing cost We expect prices to recover their long-term average growth once they start to retreat in 2023.
2. Mortgage interest rates will drop
Mortgage rates began to spike in early 2022 as the Federal Reserve announced its intentions to combat inflation.While the Federal Reserve is out of control mortgage interest ratewhich could impact them, was seen at a 30-year rate rising from 3.2% in early 2022 to over 7% by October.
So far, that effort hasn’t cut inflation significantly, but it’s increasing the odds of a recession in 2023. Therefore, we expect the Fed to start pulling back from its aggressive policy stance in early 2023. Gradually stable.
Interest rates will remain above 6% until fall 2023, when they will drop to the high 5% range. That’s higher than we’re used to, but he’s still more than 2% below the historical average.
3. Don’t expect inventory to increase significantly
nevertheless stock Levels have increased in 2022, but are still well below long-term averages. We don’t expect the number of homes for sale to increase significantly in 2023, as many homeowners don’t want to lose low mortgage rates. In fact, I estimate that 25-30 million homeowners have mortgage interest rates of about 3% or less.
Of course, homes do come up for sale for the usual reasons, such as job changes, deaths, and divorces, but the 2023 market won’t see the usual home sales we’ve seen in recent years.
4. No buyers market, more balanced market
With supply levels expected to be well below normal, a buyer’s market is unlikely to emerge in 2023. A buyer’s market is usually defined as having inventory of six months or more, and the last time that level was reached was in 2012. I was recovering from the housing bubble.
To have 6 months of inventory, we need to reach 2 million listings that haven’t materialized since 2015. Additionally, monthly sales must drop below his 325,000. A buyer’s market is unlikely in 2023, but we expect to return to a much more balanced market.
5. Sellers Must Be More Realistic
We all know home sellers have had the upper hand for a few years, but those days are behind us and although the market is slowing down, there are still buyers. interest rates are high and interest rates are low. affordable It limits the amount a buyer can pay for a home.
Because of this, we expect listing prices to drop further next year, making accurate pricing more important than ever when selling homes.
6. Workers return to work (sort of)
The impact of the pandemic on places where many people can work has been severe. This has allowed buyers to step away from the workplace and look to more affordable markets. Many companies are still deciding on long-term work-from-home policies, but I think next year will be clearer for workers.
This could be a catalyst for those who waited to buy until the expected office work frequency.
7. New construction activity unlikely to increase
permission of new house construction are down more than 17% year-on-year, and new home starts are down as well. The builder predicts he will retreat further in 2023, with new entrants beginning at levels not seen since before the pandemic.
Builders are beginning to see some relief from the supply chain issues that have hit hard over the past two years, but development costs remain high.
Trying to balance the cost of building a home with what consumers can afford to pay (if interest rates on mortgages are high) can slow down builders. This actually supports the resale market as the demand for
8. Not all markets are created equal
The market that has seen the fastest rise in house price growth in recent years is expected to decline disproportionately.For example, the market of the region where the inflow was remote workerPeople flocked to cheap housing during the pandemic.
That said, even in these markets, prices should begin to stabilize by the end of 2023, resuming a more reasonable pace of price appreciation.
9. Affordability will continue to be a big issue
Most markets won’t see home prices rise in 2023, but even the price drops won’t be enough to make housing more affordable. Mortgage affordability will also continue to be an issue next year as mortgage rates remain higher than they were over a decade ago. first time buyer.
Over the past two years, many renters have been eager to buy, but the timing just wasn’t right. With prices and mortgage rates skyrocketing in his 2022, many renters may find themselves in a situation where their homeownership dreams are gone.
I’m not saying they can never buy a home, they may have to wait a lot longer than they wanted.
10. Governments start taking housing more seriously
Over the past two years, the market has risen enough to discount millions of potential homebuyers. With a wave of demand from millennials and Gen Z, the pace of home production will need to increase significantly, but many markets simply don’t have enough land to build on.
This is why we expect more cities, counties and states to adjust their land use policies to free up more land for housing.
But it’s not just the supply of land that helps. Elected officials can take advantage of tax-increased loan tools to help home developers. This allows the government to reimburse private developers for incremental taxes that arise from residential development.
With many tools like this at the government’s disposal to facilitate housing supply, I sincerely hope that the government will start taking this important issue more seriously.