A fresh real estate market is one of the many things we’ve looked forward to in 2023. And with prices coming down in response to rising inflation and interest rates, many would-be homeowners are hoping this is their year.
Unfortunately, while the runaway rising prices of the last two years have cooled significantly, there is little to indicate more affordable housing in the next few months. But, there continue to be signs of a shifting market producing a buyer’s market as early as this summer.
What goes into this market shift? Let’s break it down.
Prices are Stabilizing– But Still at Record Highs
The seller’s market beginning in 2020 was due, in part, to the lack of available housing to fill the demand. And while prices have dropped a few thousand in many markets, they haven’t fallen to pre-2020 values. It seems unlikely they ever will.
Prices should continue to rise, although at a much more stable rate than in the last few years. So expect a much lower increase in valuation rather than the 15-30% YTY we’ve seen in the early 2020s.
Inflation and Interest Rates Taking a Lion’s Share
While many hope to afford a lower-priced home, the next question is the impact of interest rates and disposable income.
Interest rates are at a 20-year high, hoping to combat inflation and stabilize the market. But, unfortunately, averaging between 7 and 9% from a year ago’s 2-3% hits potential buyers hard. And worse, the extra several hundred dollar payments aren’t reflected in equity.
In addition, inflation has risen 7-8% annually for the past few years. But raises and promotions are not keeping up with the price of groceries and gas.
Even with lower prices, the decreased available income and rising interest rates continue to keep homes from being affordable. Many Texas counties report 30% of a homeowner’s income going to housing, but Collin County reports a staggering 52%.
What Will a Recession Do to the Rate of New Builds?
The future real estate market will hinge heavily on the ability of new builds to meet the housing demand. Home construction companies were racing to fill the staggering home demand during the pandemic. But seeing signs of a cooling market, many construction companies are slowing production.
Will the slowed production maintain a shortage of homes compared to demand? Or will the cooling market allow a pocket for builders to make a significant dent in the unfilled demand?
We’ll have to see how the current recession impacts the construction and real estate investment sectors.
Looking to Buy in 2023?
Working with a real estate agent you trust with a reputation for putting your needs first has never been more critical.
At Alta Terra Realty and Auction, we know the Texas, Oklahoma, and Arkansas market and demographic like the back of our hands. And we have a clear understanding of the values of the community.
Contact us today to schedule a call, and we’ll help you find the perfect place for you, your family, or your business!
Additional reference:
https://qz.com/us-housing-in-2023-wont-be-a-buyers-market-or-a-sellers-1849924166