As the real estate market shifts, expert agents share what the industry will look like heading into 2023
By Caroline Heller
2022 marked the beginning of the end for what was an unprecedented seller’s market.
Mortgage interest rates climbed from around 3% to above 5%, and by June 2022 inflation had reached its highest annual rate since November 1981.
“We saw one of the craziest markets on record over the last couple of years, but it did a U-turn in the span of a quarter,” says Timothy J Kinzie, CRS, founder and CEO of Montlor Luxury Realty in Denver, Colorado, and Cary, North Carolina. “We went from record highs in appreciation to a 20-year low in mortgage demand.”
Although the market has cooled down in some regions, agents and experts across the country don’t foresee a crash or drastic downturn in 2023. Rather, many see a return to what it was prior to 2020—a normal, healthy market.
Here are a few predictions CRSs have for 2023’s national housing market outlook:
2023 will see a return to a slower, but still healthy market
“The headlines are going to say how drastically different 2022 has been from last year. But I always take that with a grain of salt,” says Brooke Miller, CRS, an associate broker at Long & Foster Realtors in Fredericksburg, Virginia. “This is because the last two years were highly unusual and fueled by interest rates that we will probably never see again.” Instead, she has been comparing the first half of 2022 to the last normal real estate year of 2019. “Our market in Virginia is performing better than it did in 2019—and that was a great year,” Miller says.
Don’t compare 2022 or 2023 to 2021 or 2020 because that’s unrealistic, Miller says. What agents should expect in 2023 is that things will slow down in terms of time. It will take a bit longer to sell and pricing adjustments will happen, but home values will still rise at a normal rate of 3% to 7%.
Seasonal fluctuations will return
“My prediction for this next year is that the seasonal adjustments are coming back, which we haven’t experienced in two years,” says Miller. July and August are the slowest months in her Virginia market in addition to the typical slowdown around the end of the year.
Mark Handlovitch, CRS, an associate broker at RE/MAX Real Estate Solutions in Pittsburgh, Pennsylvania, predicts a similar phenomenon. “I live in a market in Pittsburgh where it’s seasonal. We have our ebb and flows based on the time of year. However, that was gone for a few years with how crazy the market was,” Handlovitch says. “We’re starting to see a little bit of that feeling come back. June 2022 felt like a normal June where things started to slow down a bit because everyone went on vacation after school got out.”
2023 will be like years before 2020 in terms of seasonal cycles, and agents should prepare and educate their clients accordingly.
Above 5% interest rates will become the new (and old) normal
REALTORS® who have been in this business for a while can remember a time when 5% and 6% interest rates were normal. Some can even remember the high interest rates of the 1980s.
When Michael Marcus, CRS, an associate broker at Coldwell Banker Realty in Denver, Colorado, first bought his home in 1982, he was able to assume a VA mortgage at 13%. “And I was very lucky,” Marcus says. “My friends were getting new mortgages between 18% and 20%.”
Millennials, who continue to make up the largest share of homebuyers, are used to seeing rates below 4%. But REALTORS® predict that once people realize that above 5% interest rates are the new normal, their impact on the market will be minimized.
Assumable loans might become a more popular offering due to higher interest rates
Miller predicts that loan assumptions are going to be a big trend for the next decade. A loan assumption is when a seller who has a VA or FHA loan can have their loan assumed by a qualified buyer. “The process takes longer—but it saves the buyer a ton a money,” Miller says.
It will be a more balanced market
Supply is still relatively low across the country, but interest rates and inflation will put the ball back in the buyer’s court when it comes to closing cost help, inspection and repair negotiations, and below initial asking price offers—things that were thrown out the window during 2020 and 2021.
M. Paula Di Mauro, CRS, broker and owner of Urban Key Realty in Miami, Florida, predicts a neutral market. “We’re slowly moving away from the seller’s market,” says Di Mauro. “I think we’ll have more of a balanced market for 2023.”
Prepare for 2023 by registering for the free member-benefit webinar, “Creating a Gameplan for 2023,” presented by Christy Murdock, at CRS.com/webinars.
Photo: iStock.com/Ildar Abulkhanov
