Ask a Broker: What does the new year hold for the market?
Ask a Broker
What do brokers expect to happen in 2023?
Turning our attention and thoughts toward 2023 and 2024, we see a distinct return toward a more balanced market that will require buyers to be patient and sellers to acknowledge a change in aspirational pricing.
In every market evolution, there are opportunities for the cash buyer, and in a softening market, there will be chances to purchase properties expeditiously. Sellers who have priced their property aggressively will likely find buyers are no longer willing to overpay or compete in multi-offer situations. However, buyers who are nimble can be opportunistic: When a great property comes to market, cash will provide the chance to acquire the right property at the right price.
For buyers who elect to finance their purchase, local buyers and resort buyers who need financing will find it easier to get their offers accepted than in 2021 and 2022. During that white-hot market, buyers who required financing to purchase were disappointed when their offers failed to be considered in lieu of cash buyers. The resort market inventory remains low and this will support the continuation of strong list prices.
“Given that we are unlikely to see an improvement in affordability anytime soon, many buyers will be priced out of the market, while others will simply be unwilling to make a purchase,” said Property Economist Sam Hall. “As bidders become scarcer, market power will shift further from sellers to buyers.”
This environment will give an advantage to buyers who have carefully assessed properties in the market, defined their goals, and have clarity in terms of financing, contingencies and decision making. In these narrow inventory markets, having a seasoned professional broker is essential.
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The Federal Reserve has increased interest rates to counteract inflation and slow the heated economy, and this will clearly cause changes in the real estate market. It will be most consequential in areas where buyers are highly sensitive to rate changes.
In the resort market, it will certainly affect the local buyers and likely give a pause to those purchasing second homes. It is probable that those buyers may take a wait-and-see approach. The positive is that as the market slows a bit, financing will be available, and refinancing will be the preferred option when interest rates moderate downward. You marry your home, but you are just dating your mortgage!
While 2023 may not be the ideal time to purchase for home buyers because of high-interest rates, the landscape ahead looks much better in 2024.
Home prices will rise slightly and sales will dip next year before making a comeback in 2024, according to Lawrence Yun, the National Association of Realtors’ chief economist. Yun says there will be a “strong rebound” in 2024.
“The prices will be mostly stable across the country (in 2023), meaning that half of the country will see minor price gains, the other half of the country will see minor price declines,” Yun told attendees at The Realtor Experience conference in Orlando Florida in mid-November, noting that some specific markets such as San Francisco may see a bigger price decline than 2 percent. “Then in 2024, you have to say the long-term path looks bright, therefore just hang in there for this year’s difficulty and maybe next year’s still under transition, but after that everything should be in a better situation.”
While the next few months may pose some dark challenges, the market looks to be turning toward a bright future. If you are looking to buy, either with cash or with the prospect of refinancing down the road, now may be a good time to jump in.