2023 Housing Market Forecast - ErinRoseSellsRealEstate.com

2023 HOUSING MARKET FORECAST

The trusted data and insights you need to plan for what’s coming in real estate this year.

CONTENTS

Introduction

What will happen with home prices?

As more media headlines suggest doom and gloom for the housing market and our economy, this question is probably top-ofmind for many people right now.

What’s going to happen with interest rates?

The past year saw the fastest and biggest rise in interest rates ever. Which leaves many wondering... what will happen with them in 2023?

What does next year hold for home sales?

The past year saw the lowest amount of homes sold in ten years. So, will we see activity pick up or are we in for another year of more of the same?

Housing crash? There’s no wave of foreclosures on the horizon

With words like “housing bubble” and “housing crash” dominating headlines, flashbacks to 2008 are high. This is how to set the record straight.

Your most important job as an agent this year

There’s a new market reality, and the way you react to it will determine if you survive or not in today’s market.

Bottom Line

Now that you have this information, the most important next step is figuring out the best ways to use it to fuel your business in 2023.

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About Keeping Current Matters

KCM helps real estate agents like you build their brand as the educated agent with trusted market insights and timely marketing content

At KCM, we believe knowledge is power. That’s why our innovative approach to educational content and real estate marketing helps agents become more confident and stand out.

That way you have time back in your busy day to focus on what matters most: your clients.

When getting help with money, whether it is insurance, real estate or investments you should always look for a person with the heart of a teacher, not the heart of a salesman.

Dave Ramsey

Housing Market Forecast What will happen with home prices?

As more and more media headlines create confusion for the housing market and our economy, this question is probably top-of-mind for many people right now.

While we can’t fully forecast the future, you can do your best to provide a wellrounded opinion based on data, insights and expert quotes.

The most important piece to note is that this is a dynamic market that is changing, and it is changing quickly.

When we see shifts in housing like this, it can seem impossible to keep up with all of it, but here is what you can tell anyone who asks this question.

Yes, homes are staying on the market longer. We’re not seeing a large influx

of new listings, suggesting we’re returning back to the seasonal norms we typically see this time of year. But it is still a sellers’ market. Why? Because prices are driven by supply and demand, and we still have a low supply of homes on the market. This means continued upward pressure on home prices.

And for the naysayers who are calling for a housing crisis, this quote from Redfin sums it up best,

“For those bearish folks eagerly awaiting the home price crash, you’ll have to keep waiting. As much as demand is pulling back,

supply is as well. And that’s reducing downward pressure on prices in the short run.”

Looking at the latest home price forecasts for 2023 we see this: some experts are projecting slight appreciation, and others are calling for slight depreciation. When we average these together, we see relatively neutral or flat home price appreciation for 2023.

So, with that in mind, bringing in these national insights as well as what’s happening in your market will help you, your kin and your clients understand the bigger picture of what’s ahead for real estate.

This is where layering in that local data becomes more important than ever.

What we’re feeling right now is some of those overheated markets where prices went up so rapidly during the pandemic are starting to see more of a shift in prices than some of the other markets that may be holding steady.

For current clients looking to sell, there are a couple key points for them to know:

• Pricing their house appropriately so they can catch the eyes of serious buyers is important.

• With supply up and demand down, buyers have more room to negotiate now. Be flexible and willing to meet them halfway.

• First impressions matter. Think about staging the home, to making small cosmetic updates, or tackling repairs.

For those bearish folks eagerly awaiting the home price crash, you’ll have to keep waiting. As much as demand is pulling back, supply is as well. And that’s reducing downward pressure on prices in the short run.”

- Redfin

WHAT’S GOING TO HAPPEN WITH mortgage RATES in 2023?

The past year saw the fastest and biggest rise in interest rates ever. Which leaves many wondering... what will happen with them in 2023?

More than anything else, last year’s housing market was defined by rapidly rising mortgage rates. And they haven’t just risen. They have more than doubled in less than a year, something that has never been seen before.

To put that into context, the average monthly mortgage payment is currently about $1000 more than it was a year ago.

But the biggest question that you need to be able to answer is why, and the answer to that is inflation. The Federal Reserve has been making moves to slow the economy down and real estate plays a big part in our economy.

So, as inflation stays high, mortgage rates will stay high. And as history tells us, when inflation starts to ease, mortgage rates should too.

As people ask about what will happen going forward, the answer is to just keep an eye on what’s happening with inflation.

Then there’s the other piece of this, the dreaded “r” word: recession.

The biggest question here is if a recession is called, how will it impact the housing market?

For most buyers and sellers, they think that a recession means a full on housing market collapse like what happened in 2008. And in most instances, the truth couldn’t be further from that.

For example, a recession does not mean

falling home prices. In the past 6 recessions, only two of them saw a decrease in home prices. But bringing it back to mortgage rates, a recession may not always cause home prices to fall, but it usually means mortgage rates will.

In the absence of trustworthy, up-to-date information, real estate decisions are increasingly being driven by fear, uncertainty, and doubt. These decisions can be hugely consequential for consumers and businesses.

Stress less. Share more.

Always have the latest housing data and insights so you can be the educated agent that thrives this year.

What does next year hold for home sales?

Last year saw the lowest amount of homes sold in a decade. So, will we see activity pick up or are we in for another slower year?

Total home sales for 2022, including both existing homes and new construction were projected to be around 5.8 million home sales.

Coming off of the frenzied market we saw for much of the past 2.5 years, that feels like a major slowdown considering total homes sold was roughly 6.9 million.

You’re probably already feeling some of that right now, and if you’ve been in the business for the last five to 10 years, you haven’t seen a year like this before.

So, coming off that high of 2020 and 2021, most of 2022 felt much slower and possibly more difficult.

With that context, this is what this year is projected to look like: 5.1 million home sales. Now, while this is less than last year, we can’t say for sure what that final number will be.

Experts tend to re-project throughout the year, and right now they’re making projections for 2023 based on a lot of different factors: inflation is high, mortgage rates are high, and buyer demand has slowed.

We have more inventory on the market, but we’re not seeing a ton of new listings right now.

We’re also seeing new construction slowing a bit. So, pro-

jections for this year are also clearly lower.

However, as we start to see signs that the Fed is getting inflation under control and mortgage rates come down in time, it’s possible that the previous projection of 5.1 million homes sold ticks up throughout the year.

Plus, it’s really not a matter of if, it’s more about when we start to see that activity really kick back in.

So, the question becomes, what’s going to make an impact on those projections? What’s going to cause more transactions? What’s going to reinvigorate that number in 2023?

This quote from Lawrence Yun

says it really well:

“The upcoming months should see a return of buyers, as mortgage rates appear to have already peaked and have been coming down since mid-November.”

Additionally, as we start to see inflation hopefully come under control and mortgage rates respond to that, we are going to see more buyer activity.

Buyers are looking for stability and predictability in the market. As that starts to unfold, we will see more buyers come back to the market, and that should start to increase the pace of sales as well.

So, the best thing you can do is to continue to watch out for re-projections as the housing market continues to shift.

It’s really not a matter of if, it’s more about when we start to see that activity really kick back in.

Housing crash? there’s no wave of foreclosures on the horizon

With words like “housing bubble” and “housing crash” dominating headlines, flashbacks to 2008 are high. This is how to set the record straight.

With the rapid shift that’s happened in the housing market in the last 12 months, some people are raising concerns that we’re destined for a repeat of the crash we saw in 2008. But in truth, there are many key differences between what’s happening today and the bubble in the early 2000s.

One of the reasons this isn’t like the last time is the number of foreclosures in the market is much lower now. Here’s a look at why there won’t be a wave of foreclosures flooding the market.

Not as Many Homeowners Are in Trouble This Time

After the last housing crash, over nine million households lost their homes due to a foreclosure, short sale, or because they gave it back to the bank. This was, in large part, because of more relaxed lending standards where people could take out mortgages they ultimately couldn’t afford. Those lending practices led to a wave of distressed properties which made their way into the market and caused home values to plummet.

But today, revised lending standards have led to more qualified buyers. As a result, there are fewer homeowners who are behind on their mortgages. As Marina Walsh, Vice President of Industry Analysis

at the Mortgage Bankers Association (MBA), says:

“For the second quarter in a row, the mortgage delinquency rate fell to its lowest level since MBA’s survey began in 1979 –declining to 3.45%. Foreclosure starts and loans in the process of foreclosure also dropped in the third quarter to levels further below their historical averages.”

While you may have seen recent stories about the number of foreclosures rising today, context is important. During the pandemic, many homeowners were able to pause their mortgage payments using the forbearance program. The program gave homeowners facing difficulties extra time to get their finances in order and, in many cases, work out a

plan with their lender. As were concerned it would result in a wave of foreclosures coming to the market.

That fear didn’t materialize. Data from the New York Fed shows there are still fewer foreclosures happening today than before the pandemic (see graph below):

For the second quarter in a row, the mortgage delinquency rate fell to its lowest level since MBA’s survey began in 1979...

That means, while there are more foreclosures now compared to during the pandemic (when foreclosures were paused), the number is still well below what the housing market has seen in a more typical year, like 2017-2019.

And most importantly, the number we’re seeing now is still far below the number we saw during the market crash (shown in the red bars in the graph).

The big takeaway? Don’t let a headline in the news mislead you. While foreclosures are up year-over-year, historical context is essential to understanding the full picture.

Most Homeowners Have More Than Enough Equity To Sell Their Homes

Many homeowners today have enough equity to sell their homes instead of facing foreclosure.

Due to rapidly rising home prices over the last two years, the average homeowner has gained significant amounts of equity in their home.

And if they’ve stayed in their homes even longer, they may have even more equity than they realize.

As Ksenia Potapov, Economist at First American, says:

“Homeowners have very high levels of tappable home equity today, providing a cushion to withstand potential price declines, but also preventing housing distress from turning

into a foreclosure. . . the result will likely be more of a foreclosure ‘trickle’ than a ‘tsunami.’”

A recent report from ATTOM Data explains it by going even deeper into the numbers:

“Only about 214,800 homeowners were facing possible foreclosure in the second quarter of 2022, or just four-tenths of one percent of the 58.2 million outstanding mortgages in the U.S. Of those facing foreclosure, about 195,400, or 91 percent, had at least some equity built up in their homes.”

With all this considered, if you see headlines about the increasing number of foreclosures today, remind yourself and your clients that context is important.

While it’s true the number of foreclosures is higher now than 2020 and 2021, they are still well below pre-pandemic years.

Homeowners have very high levels of tappable home equity today, providing a cushion to withstand potential price declines, but also preventing housing distress from turning into a foreclosure... the result will likely be more of a foreclosure ‘trickle’ than a ‘tsunami.

-Ksenia Potapov, Economist at First American

How to Turn These Insights Into Action YOUR MOST IMPORTANT JOB AS AN AGENT THIS YEAR

There’s a new market reality, and the way you react to it will determine if you survive or not in today’s market.

The real estate business is shifting and with this new reality, all agents need to know:

• The real estate business has changed forever

• What worked in the past to make you a successful agent won’t work today (or tomorrow)

• You need skills for this new market reality

What the consumer expects of real estate professionals today is very different than what they expected of them only ten years ago.

The agents who don’t evolve into what today’s consumer demands will not survive.

What clients really want is someone who can…

• Analyze all the available information

• Connect the dots and let them know if now is a good time to buy or the right time to sel l

• Take the time to explain their options—simply and eff ectively

It’s a big change…and it’s one you need to embrace to move forward.

To help put the change and the need for evolution in perspective, think of real estate as a NASCAR® race, and you—the agent—are the racecar driver. Right now, you’re driving in that race, and the track is taking a sharp turn.

To some agents this might be scary. But this is actually a tremendous opportunity. Why?

Because successful agents, like great racecar drivers, don’t get paid to navigate the straightaways.

Think about it … if anyone got into a racecar, hit the gas, and kept the wheel steady on a straight, empty road, they could drive very fast without a problem.

Navigating the straightaways is easy. But approaching a turn at 180 mph without either slamming the brakes or crashing into the wall requires true skill.

When things change dramatically, some agents (like novice racecar drivers) will hit the brakes. Yes, some even stop the car, pull over, and get out.

On the other hand, some agents keep going full throttle and crash. We don’t need to explain why this is not a great strategy.

But the great agents (like the great drivers) see the opportunity in this turn. It’s an opportunity for you to stand out from the competition. Most of all, it’s an opportunity to define your brand as a trusted advisor - one that will outlast any housing market.

The turn we’re facing in the real estate industry doesn’t have to be a stop sign. It can be a great

It’s an opportunity for you to stand out from the competition.

The turn we’re facing in the real estate industry right now is a great opportunity for those who navigate it properly.

opportunity for those who navigate it properly.

In order to know whether you have a depth of an answer, ask yourself three questions:

• Do I know what is truly happening in the market?

• Do I know why it’s happening?

• Can I simply and eff ectivelymcommunicate both of these points—what’s happening and why it’s happening—to a consumer?

Knowing what’s happening and why it’s happening, as well as how to communicate those two things, are what make you an expert and trusted advisor. It’s what enables a buyer or seller to say, “I am going to have the courage to move forward. I’m no longer afraid of making a decision.”

Seth Godin, one of the greatest marketers of our time, put it best. He said: “People don’t believe what you tell them, but they always believe what they tell themselves.”

When you’re sitting with someone and explaining their options, you have to educate them. Remember that they won’t believe what you tell them.

That’s why you have to bring them to the point that they understand what you do. When you get them to that point, you’re no longer telling them it’s okay to buy or sell. Now they know it’s okay based on their own understanding of what’s happening.

That’s why you have to bring them to the point that they understand what you do.

When you get them to that point, you’re no longer telling them it’s okay to buy or sell. Now they know it’s okay based on their own understanding of what’s happening.

The Bottom Line

Now that you know what’s ahead for the market, here’s how you use that knowledge to fuel your business in 2023.

If you really want to succeed in today’s shifting market, there’s one big piece you may be missing in your strategy: branding yourself as the market expert. Time and time again, many agents focus on branding themselves as a utility rather than a knowledge broker.

But in times of uncertainty, your clients need more. They need answers that cut through the confusion and bring clarity to what’s really happening in real estate.

Your brand should reflect this. You can do the paperwork while also being a reliable source as someone who knows what’s happening in the market. You’re trustworthy. Dependable. Highly recommended.

Why? Because that’s exactly the kind of professional today’s buyers and sellers need right

now. So, how exactly do you do this? We’re glad you asked.

Great Content = Market Expert

In this section, we’ll walk you through several examples, giving you specific topics you could cover and ways you can use insight-powered content in different areas of your marketing efforts.

As you go through the examples, remember that the overall goal of content marketing is to answer your prospects’ and clients’ questions with useful information.

The biggest questions they need answered right now are:

• What’s going to happen to the real estate market?

• What will happen with mortgage rates?

• Is now a good time to buy?

• Is now a good time to sell?

• Is real estate still a good investment?

Your job is to find the best way to answer those questions. Let’s dive in.

Social Media

Social media is one of the best marketing tools at your disposal, and knowing how to use it effectively to drive your business is pivotal.

One best practice is to share quick-hitting, visual content that sparks conversation and helps answer questions consumers have.

The key to success is consistently posting this content in order to keep your clients in the loop on the latest insights.

Tips & Tricks for Using Content on Social Media:

• Post at least 3-5 days a week on all platforms

• Stick to real estate topics

• Share powerful visuals

• Make market update videos

• Fill your captions with useful information

• Ask questions to engage your audience in conversation and check the pulse of what people in your area have questions about

Top agents attribute social media as one of the biggest and most important assets for their success in this business. And it can be yours too!

Email Marketing

We all know we should stay in touch with our clients to keep those relationships strong. But other than sending out our latest listings or wishing them a happy holiday, what else should we talk about in our email marketing?

Email is the perfect place to provide useful information or recent news that your clients will appreciate, making KCM blogs a great asset.

Here are some tips and tricks to help you use email to keep your clients informedd:

• Make every email useful and valuable

• Be a news source

• Use a clear subject line

• Segment and target your audience

• Provide a strong call to action

This is the marketing tool that’s best suited to let you act as a news source for your clients so they know who to turn to when they’re ready to make a move.

Video

Video is one of, if not the, most useful way to get important information out to your sphere fast.

And the truth is, most people prefer to consume information this way today anyway.

If you’re not using video in your marketing strategy, you’re missing one of the biggest opportunities you have to educate while also entertaining your audience.

So, here’s our challenge to you. Every week create one market update video that covers some of the biggest questions you’re getting from buyers or sellers.

Here’s a simple way on how to do it:

• Find an article from a trustworthy source that covers a hot housing topic

• Piece together a script using information from it

• Record yourself reciting the script

• Share through email, social media, text, etc.

RealTalk by KCM™, the first allin-one video creator for agents makes this extremely easy.

Each week, you’ll get a new script covering one of the hottest topics in the housing market.

Then, with our built-in teleprompter, you can easily record and share that video out to your sphere. Learn more at:

TryKCM.com/RealTalk