Bite-Sized Real Estate Trends For 2023

With much uncertainty in the real estate market these days, it has been difficult to forecast where the future is headed. With signs of improvement, such as the increase of single-family home builders’ confidence rising to 42 points, at the same time, this stands in contrast with new home starts declining along with new residential permits for single-family homes. In a recent interview with Yahoo! Finance, billionaire investor Grant Cardone claimed he believed that “we are entering the BEST real estate market opportunity since 2008. With the Fed raising interest rates, it has sidelined home buyers, which means prices are going to pull back. If you are an end-user looking to enter the housing market, now is a great time to buy a house cheaper than it would have been at the beginning of the year.”

While this may prove accurate, prices are still climbing, with the listing prices rising by 7.9% in the week ending February 11 compared to the same week last year. On top of this, should prices start to decline thanks to waning demand, house affordability may prove out of reach to many, with mortgage rates inching closer to the big 7% as reported on Mortgage News Daily as of 02/25/2023. Rates for a 30 Year Fixed Mortgage reached 6.86%, the highest since November 14 last year.

With this burgeoning uncertainty, we’ll try and highlight some (bite-sized) trends we see for the real estate market in 2023.

Further Fed Hikes

The Fed has been clear that it would use increased rates to combat inflation and has done so consistently through 2022 and into early January. While hopes were that the Feds were done, with Philadelphia Fed President Patrick Harker stating that “rates were at a level that they could slow down”, that may not be the case. With inflation not reaching the target of 2% the Federal Reserve may continue increasing rates – though likely not at the same rate or pace.

Mortgage Rates Will Climb

The continued rate hikes by the Fed may continue to influence mortgage rates, with rates possibly breaking 7% by March. Reduced demand should precipitate a consistent drop in mortgage rates by May or June. And as a key predictor of affordability, this will have a knock-on effect on sales. In fact, this can be seen right now with fewer homes going into contract this month.

A Buyers Market (eventually)

Sellers have enjoyed climbing prices consistently with Year On Year growth. However, the balance is shifting, with prices expected to fall, with some expecting as much as a 10% fall in some markets. Regardless, with home affordability suppressed by higher mortgage rates and a cooling economy, sellers will have to contend with a smaller buyer pool. As Grant Cordone predicted, prices should start to normalize. Don’t expect significant changes for at least another few weeks or probably a month or so, though.

Inventory will not improve drastically

Construction has faced significant challenges this year, from increased labor shortages to fluctuating material prices, and as such new housing starts are not expected to recover in any meaningful way. Less new property entering the market, paired with more homeowners holding onto their current property thanks to increased interest rates and potentially falling prices, there will continue to be a shortage of inventory on the market.

These are just some of the trends we foresee in the coming months. That being said, forecasts can be wildly inaccurate during an inflation run, so take these with a grain of salt. As usual, we’ll keep track of new developments to ensure you’re as up-to-date as possible, so stick around.

And if you’re an investor considering taking up Grant Cardone’s advice and looking to invest in property soon, contact the REI News team. We’ll help you find the best financing to secure your real estate deal in these uncertain times.

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