2023 Housing Market Forecast

 

Our friends at the LTW Group shared with us a presentation by Chief Market Strategist for Residential Finance, Barry Habib.

He answered the questions:

  • What’s going to happen with interest rates?
  • Is the value of my home going to decrease?
  • What’s the forecast for the real estate market in 2023?

What is going to happen with  interest rates?!

The ten year treasury bond and the mortgage rate have a normal spread of 175 – 200bp. 

Should this trend continue – Barry Habib, chief market strategist for Residential Finance, predicts that treasury bonds will come down to three which means mortgage rates will be closer to 5%.

Will the value of my home decrease?

According to the S&P Case-Shiller U.S. National House Price Index, during 8 of the last 9 recessions homes home values went up during and after the recession. 

The only time this didn’t happen was during 2006. 

In 2006 builders built more homes than ever before. 

Household formations dropped! (A household formation is the formation of a new household – think when your adult child moves out of your home.) 

Why did household formations drop in 2006?

On average, an adult moves out of their parents home at the age of 33. When we step back to look at the birth rates of Generation X we see a sharp decline. 

Are we on the brink of another housing bubble?

Quick answer – no! There are no outlandish mortgaging programs out there right now. 

Ultimately, a housing bubble comes down to supply and demand. 

What effects supply?

  • Builders finishing homes 
  • The number of homes that have to be retired. 

Where does demand come from?

  • Household formations. 

 

Babib’s forecast for 2023:

  • Low single digit appreciation
  • Rents will continue to rise

Huge thanks to our friends at the LTW Group for sharing this fantastic information with us!! 

The LTW Group has a ton of resources and programs that allow buying right now a painless process. Reach out to them today! 

Are housing prices going to drop in Gatlinburg, Tennessee?

A question everyone wishes we knew the answers to!

While we might not know for sure, we can share a few opinions from industry experts.

Are housing prices going to drop in Gatlinburg, Tennessee?

The short answer: Prices are likely to drop further, but not by as much as they did during the housing bust. 

“It was different in 2008, 2009 because that drop in prices was because of a push from sellers,” said Jeff Tucker, senior economist at Zillow. “Because of foreclosures and short sales there were a lot of extremely motivated sellers who were willing to take a loss on their homes.”

The previous housing crash the inventory of homes for sale was 4x high that it is now! Current inventory is still lower than pre-pandemic levels, which is keeping prices strong.

 

How much are housing prices going to drop?

“Unlike the run-up in prices during the pandemic that caused home values in markets across the country to surge, the cooling off will be more regional, said Tucker.”

 

Tucker predicts there will be a small decline in the Southeast.

 

What does a housing price decline mean for sellers?

Because we’re likely to see a smaller decline in prices in our area – it’s still a great time to sell.

Steven James, the president and chief executive of Berkshire Hathaway HomeServices New York Properties, suggests, “The best strategy for sellers is to start at the right price. The last thing you want in a shifting market is to have something sit.”

We keep a beat on the market statistics monthly, you can see the latest one here. 

 

What’s happening to the real estate market?

Key Takeaways from CNBC “Existing home sales fall to a 10-year low in September, as mortgage rates soar” article

Are sellers still receiving multiple offers? Are homes still selling over asking?

Lawrence Yun, chief chief economist at the NAR, answers these questions on a National level, ““Despite weaker sales, multiple offers are still occurring with more than a quarter of homes selling above list price due to limited inventory. The current lack of supply underscores the vast contrast with the previous major market downturn from 2008 to 2010, when inventory levels were four times higher than they are today.”

Next week we’ll explore what this looks like locally – while we can’t provide information about multiple offers, we CAN answer some questions about list to sale price ratios! 

 

Are prices falling?

Yun says, “Tight supply continues to put pressure on home prices, with an increase of 8.4% from September 2021. Prices climbed at all price points. This makes 127 consecutive months of annual increases.”

“Prices are cooling, however. September marked the third straight month-to-month price decline, which usually fall this time of this year.”

 

Do we know if they will continue to fall?

Not quite yet, but we’ll keep you informed monthly with market statistics. Did you see last month’s? Check it out here 

 

Fortune reports on Zillow’s 2023 Housing Market Forecast

During the spring home buying boom Zillow made a big claim – home prices would would soar another 17.8% between February 2022 and February 2023. 

Weeks later the Pandemic fizzled.. Zillow slashed its home price outlook. 

In September, the outlook was revised down to 1.2%

Now Zillow expects the U.S. Home values to rise 1.4% 

“Back in May, Moody’s Analytics chief economist Mark Zandi told Fortune that rising mortgage rates coupled with “overvalued” home prices would push the U.S. housing market into a housing correction. A housing correction being a period where the U.S. housing market—which got priced to 3% mortgage rates—would work towards equilibrium. In every market, that’d translate into a sharp decline in home sales. It’d also, Zandi said, put frothy markets at risk of home price corrections.

That’s exactly what we saw this summer: Home sales plummeted across the nation, and frothy markets in the Western half of the country also saw declining home prices.”

Zillow researchers write, “”Across the country, affordability challenges have pushed potential buyers to the sidelines. Of course, this demand destruction has been more pronounced in some markets than in others. Markets with the highest prices a year ago saw disproportionately larger declines in active demand in the 12 months that followed.”

Heading into 2023 Zillow predicts the home price correction will loose steam in some markets while it picks up steam in other places. 

Both Knoxville and Morristown are predicted to rise 5% over the coming year. 

Read more here! 

Housing Market Predictions for the remainder of 2022

Everyone wants to know what’s gonna happen to the real estate market?

Forbes Advisor did some research and presented their opinions. 

We’ll share some below. 

Will housing prices continue to rise?

 “Inflation, high mortgage rates and record-high home prices are making it harder and harder to afford a home, and that’s not likely to change soon. Economists at Fannie Mae expect prices to be, on average, 16% higher in the coming quarter than they were a year ago.

MBA economists also expect home price gains for the foreseeable future. They forecast a 9.8% yearly increase for prices in 2022 compared to 2021 and a 2.8% gain in 2023.”

Should I buy now or wait?

“Buy based on your budget and needs. If you find a home you love in an area you love and it also fits your budget, then chances are it might be right for you. But if you make too many sacrifices just to get a house, you may end up with buyer’s remorse and an expensive albatross you have to offload.”

Forbes Advisors has some advise for buyers and sellers in this market, click here to read their article in entirety. 

July 2022: National Housing Market Update

Last week, we provided market statistics related to the local market. 

This week we’ll provide information about the national market. 

Realtor.com released their July Housing Market Report. Here’s what Sabrina Speianu, Economic Data Manager, had to say, 

“Realtor.com®’s July housing data release reveals that the housing market is continuing to move toward more balance. Inventory levels continue to rise, providing more options to homebuyers who are still actively looking for a new home and price reductions are also increasing, as sellers adjust to the new normal. However, housing remains expensive and fast-paced with the median asking price close to June’s all-time high while time on market is still slightly lower than last year and significantly lower than pre-pandemic levels. Although demand has softened greatly compared to last year, housing activity remains robust compared to pre-pandemic levels.”

 

Top takeaways from the report are:

  • Less Frenzy Means More Options for Those Still Looking to Buy a Home
  • Time on Market Higher Than Last Year in Many Metros, but Homes Are Still Moving Historically Fast in General
  • Signs of Softening Price Growth Are Emerging

 

Click here to read the entire Realtor.com July Housing Market Report

What’s going to happen to home prices?

 

What we learned this week:

  • Mortgage purchase applications are down 18% 
  • New home sales declined 17%
  • Introduction of single family homes declined by 16%

What’s that mean?

Even though we saw declines, we are still not in a balance market. 

Brian Neeley with BusinessNews says, “Inventory levels remain 49% below July 2019 levels, giving most sellers enough leverage – at least for now – to hold off on a bottom-market selloff earlier this year.”

Every quarter, Moody’s Analytics calculates an “overvalued” or “undervalued” figure for approximately 400 markets. The firm aims to find out whether fundamentals, including local income levels, can support local home prices. 

In the first quarter of 2022, Moody’s estimated that the average regional housing market was “overvalued” by 23%.

 

 

Moody’s Chief Economist Mark Zandi said Good luck The housing market being “overvalued” by more than 25% is likely to see a 5% to 10% drop in home prices. If a recession occurs, prices in those markets could fall by as much as 15% to 20%.

Click here to read more about Zandi’s predictions! 

 

What is Happening in the Real Estate Market?

We understand why you are wondering what is happening?
And probably what will happen in the near future.No one knows.

We found resources for a few pressing questions so that you can stay in the know!

Is the power shifting in the market?
Taylor Marr, the deputy chief economist at Redfin, says, “As sellers adjust their behavior it’s already changing the housing market.”

“The housing market isn’t crashing, but it is experiencing a hangover as it comes down from an unsustainable high,” Marr said in a statement to Insider, adding that a lot of home sellers are already beginning to drop their asking prices.

Will home prices come down quickly?
NextAdvisor produced an article this week that says, “Experts say it’s unlikely prices will drop in any significant way nationwide anytime soon. And while the rate at which home prices are rising will slow, that’ll likely come because fewer people can afford to shop in a pricier market. On a local level, individual markets might see prices come down, but experts say a big drop across the board is unlikely barring a big economic shift.”

The State of the Nation’s Housing Report

 

The Joint Center for Housing Studies of Harvard University published The State of the Nation’s Housing 

The report is very interesting, but a bit dense, so we compiled a few of the most interesting pieces (with page number references) below!

 

Housing construction at an all time high (page5)

“Single Family stats hit 1.1 million in 2021, exceeding the million-unit mark for the first time in 13 years. Multifamily starts were also at a 30-year high of 470,000 units. The last time housing production was nearly as high was 1973.”

 

The outlook (page 8)

“Assuming that the Federal Reserve can take runaway inflation without causing a series downturn, the near term outlook for housing demand is largely positive. Demographic shifts are favorable, unemployment is low, and wage growth remains strong. Conditions on the supply side are also encouraging, with supply-chain delays diminishing and a record number of homes set for completion in the coming months.”

 

Home Price Appreciation Set New Records in the Past Year (Page 9)

 

“This song trajectory left home prices 38.6% above their early 2020 level and more than double the 2012 low. Indeed nominal home prices stood 59.5% above the mid-2000s peak early this year while the real home prices were up 14.4%.”

For sale inventory at an all time low (page 11)

“Fewer existing homes were available for sale in January 2022 than at any point since the late 1990s.

 

Home Equity Growth (page 27)

 

Housing Challenges (page 37)

Section 6 of the The State of the Nation’s Housing  presents some of the challenges we may face in the future.

 

Click here to read the entire State of the Nation’s Housing Report.

Five Steps to Making an Excellent Buying Decision

This week we partnered with Fairway Independent Mortgage in Knoxville, TN to answer the question “How do I make an excellent buying decision in this market?”

Branch Manager, Corey Freels shares his opinion with us:

According to a recent Gallup poll , only 30% of Americans believe it’s a “good time” to buy a home, while 69% of Americans believe it’s a “bad time”.  What’s perhaps more interesting is 7 in 10 Americans believe home prices will rise in their local areas… and as a whole, Americans believe real estate is the best long-term investment.

If 70% of us believe prices will continue to rise, and as a whole we believe housing to be the best long-term investment, then why do we also believe it’s a bad time to buy? 

Does something feel amiss here to you, too?

Well, if you work in the real estate industry OR you’ve waded into the treacherous waters of homebuying over the past two years, this might not surprise you all that much.  Interest rates are at their highest level in 13 years. 

Home prices are up 20% year over year nationally. Goodness, one study reports that half of Americans physically cried  at one point or more during the process. 

 

So, why in the world would we dip our toe into the housing market right now?? 

What was my greatest fear during the last two years of cheap mortgage rates, crippling supply, and a buying frenzy?  It was that we were subsequently pricing an entire generation (or more) out of owning their own home. 

I could write an entire article on the importance of the housing industry to the entire American economy, and its impact on net worth and social mobility.  Perhaps I will, but for now take my word for it: it’s crucial, non-negotiable, essential. 

You can make a great long-term buying decision in this market, and those that do will have taken advantage of what might be a generational buying opportunity. 

Housing is a basic human need (food, shelter, water) and there is no alternative.  You will participate in the housing market one way or another.  You can pay your own mortgage or cover your landlord’s.  The choice is yours. 

Whether or not you should buy a home, trade up, or sell your current home is far more about you individually than it is about market conditions. 

What volatile markets ARE good for, however, is making us stop and think so that we make a really good decision.  This is something we should be doing all of the time. 

 

Five Steps to Making an Excellent Buying Decision 

  1. Know your numbers – know what monthly payment you are comfortable with, how much cash you will need at closing, and how much you will have left over for a rainy day.  This is impossible without first meeting with a trusted mortgage advisor.  Put a lot of work and thought into this; it’s important. When you get comfortable with these numbers, do not waver.
  2. Manage your expectations – this is a deep concept, and you need a trusted real estate agent to walk you through it.  Maybe the home that was personally decorated by Joanna Gaines and has a pool with a waterfall in the back yard is out of reach, and that’s okay.  Think long term, which brings us to the next point.
  3. Think LONG term – some advice I got early on that has stuck and holds true: don’t buy a home you couldn’t OWN for 10 years. And I’m not talking about utopia here, I mean worse case, the world falls apart, will this house work for 10 years? 
  4. Fear scape – this is something you won’t read often as given advice.  Let your mind play out your fears.  A job loss, an illness, the market turns, etc.  Let your mind chase down those scenarios to their end, and then realistically see how prepared you are for those scenarios.  You’ll often find that the worst case isn’t all that bad, and that you could make things work. And then, LET IT GO.
  5. LET IT GO – there, we’ve given our mind time to be afraid, to think this through.  Now, we make decision on what we KNOW.  We know WHY we want our own home.  We know WHAT we’re looking for.  We also know WHAT we can afford.  Now, you’re ready. 

 

With the right counsel in a great mortgage lender and a great agent, you can absolutely make a great buying decision in this market.  And this market, unlike the past two years, will present opportunities for the majority of buyers who were left out of the frenzy. 

For two years, buyers with seemingly unlimited resources have dominated the market.  Now, they’re either all bought out or they’re afraid.  It’s your opportunity to participate in one of the greatest wealth building vehicles available to everyone. 

Feeling some fear about buying a home is completely normal.  I know I did.  But letting fear prevent you from making a wise decision is not productive, and we need to let logic lead us to the right conclusions. 

Fortune favors the bold, and this market will prove to be opportune for those that are bold. 

 

Fairway Independent Mortgage in Knoxville, TN can help with any of your mortgages needs!