Inflation, The FED & Housing in 2023
Many want to know what to expect from the housing market moving into 2023. Some are comparing this market to that of 2007, but there are some major differences, including low inventory and high prices. Despite prices remaining high, there are still some amazing deals available. Watch my video to learn more! 👆🏼
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🤔 What to Expect
At the beginning of last year we saw the lowest rates in history, which then doubled by the end of 2022. This occurred on the heels of the craziest 2 years we have seen in the housing market. By December of 2022 we were seeing a much different market than that of January 2022. Currently, there are less buyers due to prices and rates.
🏠 Key Differences Between this Market and 2007
In 2007 there were roughly 4 million homes for sale. Looking at today’s market, there are only about a million homes for sale with an increase of 14 million households. Meaning there are a lot of people in need of a home with way less inventory available, which has resulted in home sales being at a record low.
Looking at December alone, nationwide we had some of the lowest numbers of homes sold that we have seen in decades and there are two key reasons why we are seeing record-low sales. The first issue is affordability. Low to moderate income homebuyers are finding it difficult to qualify to purchase a home and find one in their price range. The seconds reason is inventory. Many expected there to be a lot of homes for sale as rates went up, but in this market there are a huge percentage of homeowners that have 2-3% interest rates and do not want to sell. On top of that, people who own their homes outright are not willing to enter the current market.
👷🏽♂️ New Construction
New construction is one of the ways we can boost this economy but many builders nationwide have stopped developing, primarily because of the uncertainty in the current market. I saw an article that stated in the first quarter of 2023 we could see the lowest inventory in the past 50-100 years. Read the article here!
In many parts of California, prices have dropped 5-10% from the peak of last year to where we are today. Where prices go from here all depends on what happens with interest rates. Many experts predict interest rates will lower this year, and when that happens prices will drop with them. As you can see in the graph below, throughout history home prices have followed interest rate trend in America.
👍🏼 Amazing Opportunities Right Now
In the fourth quarter of 2022 there were sellers that were really trying to hold on to the prices of 2021, but as of January 2023, sellers are becoming much more realistic. Many sellers are taking offers below list price, paying for closing costs, and helping with temporary buy-downs to get buyers into a home with a lower rate!
🤗 Happy New Year!
As always if you have any questions or if there is anything I can do for you, please do not hesitate to reach out! I hope you have a great January, talk to you soon!
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