Perspective on the Housing Market

Because you may be getting your information from the news or limited sources, it’s time to look at the stats over the last five years: We are in the second biggest jump in pricing in the history of the home sale industry. Between 2021 and 2022 we had the second largest drop in history in home sales and ended 2022 closing around 5 million transactions. In January 2022 there was a massive high housing market with prices at an all time high and the government looked up and said, “It’s time to hit the brakes.� Since inflation is the number one enemy—because those who have more get more and those who have less lose out—the government in U.S. and Canada decided to stop it. It’s important to remember that economists are projecting 4.2 to 4.3 million home sales for 2023 and while we don’t have a crystal ball, we hope it will get better by the second half of the year. These projections and numbers will put us at the bottom of the Great Recession! The Silver Lining Economic pressures over time kept real estate gains on a 4% trend line. If we look at 2005 and 2006 we were 20% above the trend line and eight years above the trend line. When we look at today, we are only 12% above the trend line of 4%, so relatively speaking it really isn’t as expensive as it was in ‘05 and ‘06. We expect to see this downward trend with a year-over-year decline in the first half of the year and then we expect things to pick up in fall of 2023. Investing in real estate is always a long gain; there’s no get-rich-quick scheme. Over the past few years consumers were saying, “This is unbelievable! Cheap money and low interest rates.� But getting rich quick usually happens when you inherit money or you’re adopted! The most provable way to get wealthy, for sure, is if you invest and hold for long term. The person who didn’t own real estate is the one missing out right now and they have missed out over the years. Paying rent has never gained anyone equity in their home or a nest egg. Expect 2023 to be the Third Best Year in the History of Real Estate There’s still pressure from supply and demand; we have so little supply and very few new home builds. The Fed is strapped because of the low supply so they can’t lower the rates yet. They expect that prices may skyrocket if they drop the rates. Since inventory is still low it’s a great time to list your home for sale. When buyers have less to choose from they will often pay more and pick your home. Whatever you do, buyers will come to the realization soon that if they are waiting for mortgage rates to drop back to 3% or even 4%, they may not see this in our lifetime. In fact, you may not see below 5%, so don’t wait for the rates to drop. With the current banking scare buyers are now encouraged to qualify with one or two banks and not trust that their current lender will be able to come through. When interest rates were low, home prices were more affordable. Now that affordability has changed tremendously and prices are up, it makes it harder for first-time homebuyers, although lenders are getting creative and sellers are offering concessions to help. Buying residential real estate is historically the best way to build wealth. The second prices go up on houses, most landlords will raise the rent when people can’t afford to buy and start renting more, so why pay someone else’s mortgage? Looking at the U.S. Economy The gross domestic product (GDP). When Covid hit in 2020, even though the year recovered in 2021, people spent their money sitting in their homes and shopping online. They looked at houses, they looked at where they could live and the shift went from buying goods to buying services because they adjusted to the pandemic. Today, Amazon and other companies are readjusting; They don’t need as many employees so there are layoffs. We ended 2022 with the lowest number of unemployed. People are spending money although unemployment is predicted to rise this year to 5%. All the layoffs we are hearing about—the NASDAQ employs only 4% of the people in the U.S. and of that 4% only 1% were laid off—makes us think everyone is getting laid off when we listen to the news, but it isn’t clear when the news is reported; it may not be as current as you think. The government doesn’t want inflation. It will still be a rocky ride through 2023 because it is trying to get control and it’s a delicate balance. Remember the primary reasons to own a home: job related, retirement, death in the family, marriage, closer to family and friends, desire for a smaller home, financial security, and building wealth. For more information or questions contact: Tanya Starcevich, Realtor Ranked Top 10% Keller Williams Palisades | Malibu | Topanga C: (310) 739-4216; F: (310) 774-3801 canyoncoastalestates.com DRE 01864259