US Real Estate News Weekly

Real Estate Forecast for 2023

Experts weigh in on the real estate outlook in 2023

Innovations in mortgage finance: Housing finance has reached an inflection point, says Janneke Ratcliffe, vice president of the Housing Finance Policy Center at the Urban Institute. She expects to see innovation accelerate with lenders, startups, advocates, researchers, and policymakers actively pushing the envelope around what’s possible in mortgage finance. Ratcliffe also expects to see increased use of adjustable-rate mortgages, which made up 12% of total applications in November, up from 3.3% in November 2021.

No ‘foreclosure tsunami’: Foreclosure is the result of two simultaneous triggers: the lack of ability to pay, which results in delinquency and the lack of equity in a home, says Odeta Kushi, deputy chief economist for First American Financial Corp..With enough equity, a homeowner has the option of selling the home or tapping into that equity to weather a temporary financial setback. The inverse – a lack of equity in the home without a financial setback that leads to delinquency – will again not end in foreclosure. Homeowners have very high levels of tappable home equity today, providing a cushion to withstand potential price declines, but also preventing housing distress from turning into a foreclosure, says Kushi. Involuntary sales are much more likely than foreclosures.

Housing inventory will remain low: The chronic lack of listing inventory has been the key driver of price gains during the pandemic-era housing boom, and it will be the key underpinning of prices during 2023, says real estate appraiser Jonathan Miller, who prepares the monthly Douglas Elliman Real Estate report for New York City. Redfin forecasts about 4.3 million home sales in 2023, which is fewer home sales than in any year since 2011 and a decrease of 16% year over year.

Declining home prices: While there will be no wave of foreclosures, home prices will decline in 2023, says Taylor Marr, deputy chief economist for Redfin.Marr expects the median U.S. home-sale price to drop by roughly 4% in 2023. Even with prices falling 4% year over year, homes will be much less affordable in 2023 than they were before the pandemic homebuying boom, he says.?Prices are expected to fall most in pandemic migration hotspots like Austin, Texas, Boise, Idaho, and Phoenix, as well as expensive West Coast cities. Meanwhile, housing markets in relatively affordable Midwest and East Coast metros, especially in the Chicago area and parts of Connecticut and upstate New York, will hold up relatively well.

New home construction outlook: Home builder sentiment has declined for 11 straight months, signaling an ongoing contraction for home building in 2023.“Single-family home building will ultimately lead a rebound for housing and the overall economy in 2024 as interest rates fall back on sustained basis, bringing demand back to the for-sale housing market,” says Robert Dietz, chief economist for the National Association of Home Builders. Dietz also expects multifamily construction volume will fall back in 2023, after a very strong year in 2022.“A rising unemployment rate, increased apartment supply, rising vacancy rates and slowing rent growth will slow multifamily construction next year.” (USA Today)

Experts Predict Where the Housing Market Is Headed in 2023

Buyers Will Get Some Leverage: “The market has shifted to a buyer-friendlier market, but sellers still hold a lot of cards,” said Lindsay McLean, co-founder and CEO of HomeLister. “As mortgage rates rise and affordability dips, sellers may have to shift their expectations to match the changing market — and buyers will?have more leverage.”

Home Prices Might Decline: The housing market has shifted considerably, but McLean said it’s still hard to say whether this means home prices will decrease in 2023.“While prices have dropped from where they were at their peak this time last year, they are still above 2021 prices in many markets,” she said. “Mortgage rates have stabilized a bit in December and offer activity seems to be resuming, as buyers are slowly coming back to the table.”

Some Pandemic Era Owners Might Face Buyer’s Remorse: During the early part of the COVID-19 pandemic, there was a rush to buy homes — and many buyers paid premiums. However, some likely will begin to regret that decision, said Odest Riley Jr., CEO of WLM Realty and Co., based in Inglewood, California.“The biggest issue in 2023 will be buyers who overpaid in 2021 realizing they have no equity and are stuck with a property they may not have really wanted,” he said. “These buyers will be forced to ride out the down market and get back in the game when the economy recovers.”

A Sense of Normalcy Will Return: If you’ve been feeling priced out of the market the past few years, Riley said this is the year that regular, hard-working buyers will be able to get back in the game.“First-time homebuyers will be welcomed with their FHA loans,” he said, “and sellers will be handed a dose of how it feels to not be in control of the whole transaction.”This would be a major change of pace from the frenzy of the past few years.“Sellers will come back down to reality and buyers will start to realize a 5% interest rate isn’t really that bad,” he said, “opening up the market for regular transactions from FHA, VA and standard conventional loans.”

Rates Will Continue To Increase: If you are hoping rate hikes will stop in 2023, that probably won’t be the case, said Marco Smith, a real estate agent with Long & Foster Real Estate in Maryland. He predicts rates will slowly rise throughout the year.“Depending on the buyer’s credit, mortgage rates will remain in the mid-6% range throughout the first two quarters,” he said, “later climbing to a maximum of 8% in June or July.”

Buyers Will Be Choosier: Over the past few years, buyers have been at the behest of sellers, squabbling over small amounts of inventory at record-high prices. Steve Halpern, a real estate broker with Compass in New York City, predicts this will go by the wayside in 2023, as quality begins to prevail.He said buyers will have more time to look and really consider their decisions, so they will be choosier and lean toward homes they feel are well done. (GOBankingRates.com)

(Edited by Daimei Feng | 617-455-5264 | [email protected])