The 2023 Real Estate Market Defined - will it be a repeat of 2008-2012?
If you watch and read the news, you are probably seeing all sorts of negative news regarding the residential real estate market. With many so-called experts predicting that the real estate bubble would burst and that rising interest rates would lock buyers out of the market, you may be worried. In fact, with all the negative news, you may even feel stuck in your current housing situation.
I would like to offer you some truth and information to help you move forward. I would like to offer you some hope.
First, let’s look at WHY people move. Harvard University did a study on why people move in America. Maybe you can identify with one of these.
HARVARD UNIVERSITY STUDY ON MOVING IN AMERICA
A whopping 13% of the US population (homeowners and renters) moves every year. According to their study, people move for the following reasons:
• Relocation
• Relationship Change
• Retirement
• Starting a New Chapter in Life
• Military
• Becoming a Homeowner
• Job Change
• Marriage
• Education
• Starting a Family
• Divorce
• Seeking Adventure
• Upsizing
• Financial Crisis
• Downsizing
• Death
• Better Neighborhood
• Better Schools
These significant events happen regardless of the current real estate market — and often require a change in housing.
IS THIS THE SAME AS THE GREAT RECESSION?
Now, let’s look at today’s real estate market versus the Great Recession in 2008-2012. Things today are, in fact, different from what happened back then.
During the Great Recession, existing home sales in the US fell an average of 20% annually, compared to before the recession. The reasons that people did move during the Great Recession reflected the Harvard Study mentioned before – regardless of current market conditions. Please keep in mind that during the Great Recession the entire economy was crashing, not just the real estate market. Many home owners had fallen prey to predatory lending, were completely upside down in their home, and due to the Great Recession had a loss of household income. When they were unable to make their monthly mortgage, they decided to sell their home prior to foreclosure (many through short-sale); and others went through the foreclosure process. This caused a large influx of homes available for sale. With increased inventory of homes available – coupled with the lack of demand (since many people were unemployed or had limited income) – home prices were impacted in a negative way. It’s all about supply and demand.
WHAT IS THE REAL ESTATE MARKET GOING TO DO IN 2023?
Since the real estate market is based upon basic Supply and Demand, we need to look at that to determine what our current market is doing – and where it is going.
According to the National Association of REALTORS, existing-home sales rose 14.5% in February, representing the largest monthly percentage increase since July 2020. All four regions of the U.S. saw a rise in month-over-month sales, but posted declines in year-over-year sales.
Currently across America, there is a housing shortage. We have a limited supply of homes available for sale. This includes new construction homes as well as resale properties. Even with the interest rates returning to pre-pandemic levels, home buyers are still entering the market. When the supply is low and the demand is strong, prices continue to remain steady. In fact, in many markets across the country agents are still experiencing some properties in multiple offer situations. While some homes are pushing the market and then making price adjustments, and many homes are taking closer to 30-days to sell, this isn’t indicative of a slowing housing market. (for comparison the average timeframe to sell in 2009-2010 was 180 days). The real estate market is still relatively strong, even though it’s not the frantic market that we saw in 2020 through mid-2022, the real estate market is still holding strong.
• The homeownership rate in the U.S. is currently 66% (Q3 2022)
• The percentage of homeowners that sell each year in the U.S. averages at 7%.
IS NOW A GOOD TIME TO BUY A HOME?
The short answer is – Yes. Real estate is always a good long-term investment. Historically home values have gone up an average of 4-6% year over year. The extraordinary growth seen during the pandemic has ended, but growth is still expected this year in prices over all…it will just be closer to 4-6%. When your home appreciates in value, while the mortgage payoff continues to decline with each monthly payment, the difference between the two values becomes your equity. When you have equity in your property and you are ready to make another move, you have more buying power for your future purchase. Not only will you likely sell for more than you bought it for, but you also provided a roof over your family’s head, and now you have cash to purchase your next home. Buying a home now gives you the freedom to move on with your life.
Resources:
https://www.jchs.harvard.edu/
https://www.nar.realtor/
About the Author
Melissa Hailey is a successful real estate broker in Texas. She is also a certified real estate instructor and the CEO for Agent Advantage Coaching and Training, as well as a Certified Coach for Workman Success Systems. Her passion for helping REALTORS build their real estate business is evident in all that she does. The more agents she can help, the more consumers she can impact in a positive way through home ownership. Connect with her on LinkedIn @melissahaileyrealtor