After studying and listening to many predictions and analysis of the market there are a couple of words that come to mind in anticipation of 2023. They include stabilization, normalization, and opportunity. During the last 2 quarters of 2022 the word would have been uncertainty. Buyers and Seller, both, had to come to terms with the new reality of the market after 4 record breaking years. We now see the direction more clearly. The 4 drivers of the market in 2023 will be:
CONSUMER CONFIDENCE, SUPPLY, INTEREST RATES, and DEMOGRAPHICS.
CONSUMER CONFIDENCE- Consumers stockpiled saving during the pandemic and acquired a lot of equity in their homes as prices rose. As a result, spending is at an all time high, even with inflation. The resources are there but is the confidence? I am still hearing fearful discussion about homes being overpriced and the looming crash. Real estate is totally regional. It is predicted that the market will be flat in 2023 but that is a national number with some markets declining as much as 10% and others still rising, although at a slower pace. The Southwest is going to be especially vulnerable since the appreciation there has been 100%+ over the past 4 years while the Northeast has had a more gradual climb of 40%. The #1 metropolitan area (out of 100) to look at for growth for 2023, according to the National Association of Realtors, is the Greater Hartford footprint. (which includes us). Although the national number of housing unit sold is predicted to be down 34%, our market will see about 6% more homes sold and appreciation at about 9%. Job growth is also much different now than in 2008. Consumers in most industries are not fearful of job losses. In 2008, 8 million jobs were lost. In 2022 they were being created.
SUPPLY- The reason that home sales will suffer national is basically a 2-edge problem. Our country needs one million new homes to be built each year to equal the new “household” formation number. The number of new homes has been about 750,000 per year since the great crash of 2008. We are in a severe shortage. The second issue is that those who were retiring are living longer, working longer, and staying in their homes, not freeing up existing homes for sale. We are, however, seeing Sellers moving to more lifestyle friendly, warmer climates as they can work from home as well as Buyers still coming to avoid New York prices and taxes. As of the end of December we are still seeing multiple offers on just about every listing and the majority going over the asking price. Additionally, there are historically low foreclosure rates. 3.6% of inventory vs 10.1% historically and over 30% in 2008.
INTEREST RATES- Where we had NO idea of where these would end up during the past 6 months, we are now seeing decreases over the past 4 week of about .75. The banks have already built-in pricing in anticipation of one or two more FED hikes but as inflation eases the FED will be bringing their rates down. We anticipate 5.5% by the second half of 2023 and 4.5 by the end of 2024. Should you wait to buy? Absolutely not in our area as prices continue to rise. Buy now and then refi when rates come down.
DEMOGRAPHICS- We are still midway through the surge of the largest group of homebuyers ever to be in the market, THE MILLENIALS. With the bubble still 2-3 years away and many still adjusting to new reality of higher rates the wave is here and increasing. The Millennials are in control of demand while Boomers and Builders create the supply.
THE TAKEAWAY-
2023 will be a year of transition with the first half being rather slow with momentum increasing during the second half. WATCH OUT FOR 2024!! It is setting up to be the craziest market ever as consumer confidence returns, and rates drop. In the Northeast, unlike other areas, we will still see above average price increases and activity. Because of current decreased buyer confidence, buyer activity will be below normal for the first 6 months. As a result, homes will stay on the market a bit longer, maybe several weeks instead of days, giving buyers in the market more time to see the inventory and make decisions. We will see fewer offers WAY over asking. We will see offers accepted with less money down, perhaps contingent on the sale of a home (already under deposit), and we will be negotiating building inspections.
IT WILL BE A YEAR OF OPPORTUNITY FOR BUYERS BUT STILL A STRONG SELLERS MARKET.