With the holiday season packed back into the attic like so many decorations, the new year is upon us and moving fast. The holidays are usually a slower time in real estate, as people spend their money on gifts and travel, rather than saving it.
But a new year brings with it the opportunity for some to buy their first home, or for others to make a long-awaited upgrade. Below are some trends from the end of 2022 to keep an eye on for the first quarter of 2023. At the risk of spoiling the blog post, there’s not a lot of good news. That’s why later, we’ll offer a solution that will help you navigate a turbulent market
1. Mortgage Rates Are Still High
We’ll start this off with some good news: mortgage rates are down since November’s highpoint! In the first few weeks of January, mortgage rates fell, marking a .75 percent decrease since November. That means more people will be able to afford a mortgage, as even just a one percent decrease saves home buyers thousands year-over-year on their mortgages.
However, we have to follow that up with some perspective: mortgage rates are still double where they were a year ago, and though they’re falling, it doesn’t seem like they’re going to go back to 2021 levels anytime soon. To that point, the Federal Reserve met at the end of January where they announced another interest rate hike of .25 percent in an attempt to keep interest rates under control
High interest rates would lead to a market slowdown all on their lonesome. First-time home buyers, priced out of the market in the last year by soaring prices, will be even less likely to buy than others. And, of course, trading in your low-interest mortgage on one home for a higher-interest loan on another isn’t always the right choice either.
Still, even though the Fed has raised interest rates, they look ready to keep raising in the months to come. If that’s the case, your clients will be kicking themselves for not buying before the hike. Even if you have clients ready to buy, however, there may be another issue: availability.
2. Inventory Stays Low
Right now, there’s a three months’ supply of houses on the market. The housing supply is a ratio of new houses built to houses sold in a month, with information taken directly from the Federal Reserve, here. It measures how long the supply would last given the current sales rate; in this case, three months.
Usually, a five to six months’ supply indicates a standard rate of home appreciation. Basically, anything less than five is a sellers’ market, and anything more than 6 is a buyers’ market. Normally, this would mean prices would continue to rise, as buyers clamor for the few houses on the market.
Unfortunately for people looking to sell their homes, that’s not necessarily true going into 2023. As mentioned above, interest rates are still high, and may even rise higher at the end of January. Add in the fear of an oncoming recession, and you have a recipe that means it’s not quite as much of a seller’s market as it appears. More on those mitigating factors below.
3. Demand Is Down With Higher Interest Rates
Demand for housing is down, predictably, with the interest rates having risen in the last year. Add to that inflation and an oncoming recession, and you have a slow housing market. Bad news for sellers, as houses will spend more time on the market — all the more reason to price your home competitively in your market.
The good news for buyers is that low demand moderates prices when inventory is low, keeping them from skyrocketing the way they have since the pandemic. If you have a client who’s ready to buy, they’ll benefit from slightly better interest rates than the end of 2022, and prices that have stabilized a bit from their pandemic climb.
Still, that’s not always enough. If we’re generous and assume that prices fall a bit (something that may well happen in certain markets), a small reduction in prices won’t be enough to offset higher interest rates. First-time home buyers may just be priced out of this market for now, as they are unable to rely on the influx of cash from selling wherever they’re moving out of.
4. Prices Are Stable In Major Markets
Finally, a bit of good news for buyers, though it’s a product of all this bad news. In the US, housing prices have ceased their skyward climb in major markets. Any reduction in prices will be small, perhaps even single-digit. But after years of soaring prices throughout the pandemic, that’s good news.
Smaller markets will continue to see prices rise, however, as people priced out of the bigger cities move, or people with remote work embrace lower costs of living. That price rise will just be slower than it has been. And, of course, it will be coupled with lower demand in those markets in general.
5. Commercial Real Estate Is Still Struggling
Late 2021 marked high vacancy rates and little construction in the commercial sector, as corporate America navigates hybrid and remote work. There’s lower demand for office space right now than there has been in the last 20 years!
In addition to remote work, economic uncertainty in the consumer sector has led to some downsizing in the corporate world, though nothing major. With that, of course, comes downsizing office space as well. Even though retail performed the worst coming out of the 2008 financial crisis, it hasn’t been suffering as badly ahead of this upcoming recession, demand having stayed relatively where it was all year in the last quarter.
All of this adds up to a historically tough time for realtors specializing in office space. Vacancy rates continue their climb, and in Q4 of 2022, there was a net loss of occupied office space of 7.13 million square feet.
Time To Make The Most Out Of Every Lead
All this is to say that it’s turbulent in the US real estate market. With both demand and inventory low, the fast-paced market of the pandemic years seems to be at an end, for now. Interest rates, inflation, and recession all add up to a tough time for American homebuyers, which means we may be in for a slow market for the time being.
Of course, the real estate market is local, not national. These trends will influence your local market, but they won’t dictate what happens. If you’re in one of those cities that’s still growing as people embrace remote work, for example, you’ll find prices still rising and out-of-towners with money to burn still buying, even with higher interest rates. Prices will just be rising less, and there will be fewer buyers.
When the market slows down, every new client represents a bigger percentage of your monthly and yearly income. There’s never a better time to make sure you’re maximizing the value of every lead. Answering Real Estate will make sure you can get the most out of every call.
With our specialized and highly trained virtual receptionists handling your phones, you’ll be able to make sure a new lead never slips through your grasp. When every client is that much more important, you’ll want to be sure they’re getting the best possible customer service. We’ll do just that by ensuring that every caller speaks to a live receptionist, rather than having to leave a voicemail.
After every phone call, you’ll receive a message via text or email with all the important information shared in the call. Every caller’s contact information, reason for calling, and any message they’d like to leave you will be available to you immediately after every call so that you’re always on top of your business.
By ensuring every caller speaks to a live virtual receptionist, you’ll maximize your lead capture rate, making sure you have the best chance to secure all the business you can. With Answering Real Estate on your team, you’ll be able to make the most of a slow market.
Make every new lead count this year. Click here or call (631) 450-1000 to sign up for our free trial. For a limited time, we’re offering realtors who sign up for our service their first 400 minutes free.