Our 2023 Real Estate market has arrived, and I've noticed that we've been seeing a lot of mixed messages in the news about how the economy is affection home prices nationwide. True, record breaking inflation and rising mortgage rates have definitely affected our local Greater Boston market, but hopefully the information below will help you understand and clarify much of the confusion. Feel free to forward this information to any family or friends that might find it useful. .
I recently attended NAR's (National Association of Realtors) virtual Real Estate Forecast Summit, where Chief Economist, Dr. Lawrence Yun, shared his outlook on the residential Real Estate market. While his forecast for 2023 did predict some challenging times ahead, it wasn’t the doom and gloom that we’ve seen recently in the local and national news media. Here are some key take-aways from his presentation.
- We’ve all witnessed the rise in mortgage rates and its impact on the cost of buying and selling a home. Homebuyers have had to revise their expectations as to what they can afford. Sellers, in turn, have had to adjust their own expectations regarding pricing their homes. Many are still worrying about the Fed's interest rate hikes, fearing the mortgage rate will go even higher. Dr. Yun recommended looking at the 10-year Treasury bond rate rather than the federal interest rate, since the mortgage rate is essentially priced off the 10-year Treasury, and believes most of the mortgage rate changes have already occurred. Dr. Yun expects the rate will bounce along in the coming months, with some ups and downs, much like the rate for 10-year Treasury bonds. He recommends that buyers keep a close look at interest rates and lock in a rate as soon as possible before they go up again.
- Are we in a recession? One of the questions asked during the presentation related to recession: who decides whether we’re going through a recession, and on what do they base that assessment? Dr. Yun referenced the National Committee of Economic Research, the government body that ultimately decides whether we are (or were) in a recession. That said, many economists point to two consecutive quarters of GDP decline as an indicator of recession. What complicates the picture is the current job market. Typical recessions involve higher unemployment rates, and that’s not what we’re seeing. Since some economists argue that a low unemployment rate means no recession, the jury is still out. While customer confidence in the housing market has taken a dive, it’s still important to remember that a recession does not mean a housing crisis.
- Dr. Yun referenced the decline in home sales for the last six months and asked, “So, why is the market still moving fast?” He sees buyers with lower mortgage rates locked down who are eager to close a sale before their lockdown period expires, which accounts for some of the activity in the market.
He also expects days on market to steadily lengthen, given the economy, consumer confidence levels, and people’s ability or inability to buy a home at the current mortgage rate. The longer a home stays on the market, the steeper the adjustment to its price. Home sales are trending below 2019, slightly before the COVID pandemic. And while inventory has gone up, it’s still inadequate. The supply shortage, combined with higher housing costs and higher mortgage rates, will likely continue the trend of declining home sales.
"My forecast is that in 2022, we will see sales come down slightly below 2019. And then 2023 will be roughly even. I think on a quarterly basis we will continue to see sales decline through the third and fourth quarter. And the first quarter of next year, it will begin to increase."
Well I hope you found this information to be useful, and as always I'm available to answer any questions about how all of this affect your Real Estate journey. Even if you just want to have an informal chat about the current market, just call or email me and we'll get the conversation started.