Optimism Abounds for 2023

by Kelly Godbey

Will prices go down? Will they continue to go up? Will mortgage rates continue to rise? What if I want to pay in cash? Are people still buying homes today? Is the supply chain problematic? Is there any good news in the real estate market today?

The world changed in 2020 when the pandemic hit, and since then has been moving at a record pace. Probably by the time you read this article, some of the information may be outdated. That being said, Ideal-LIVING reached out to experts around the U.S. and beyond to give us their predictions for 2023. None of us has a crystal ball, but we will provide our best. It’s important to be realistic, but we’re also going to side with optimism because, at Ideal-LIVING, we want you to start living your ideal life as soon as possible.

Home Values

From 2020 to 2022, U.S. home prices increased by approximately 30%. That exponential growth may be a once-ina-lifetime growth. In many of the markets we reached out to, prices have begun to stabilize. That does not mean prices are going down; it depends on a market-to-market analysis, as all real estate is local. It is improbable that we will see a housing crash like in 2008, though home values could decrease by

10% in some areas that experienced overly high appreciation. In desirable destinations for retirees, home prices are simply flattening or slowing growth.

The record appreciation may have priced out some firsttime homebuyers. However, if you owned your own home during that time, it is most likely worth significantly more than at the beginning of 2020. If you are waiting for prices to go down, it’s unlikely they will go down proportionately to the increases.

Rising Interest Rates

Let’s get to the elephant in the room — INFLATION. It affects everything from the food we eat to the gas we put in our cars, and yes, to home building, selling, and buying. At the writing of this article, inflation is at 8.3%, and The FED is doing everything it can to bring down spending, and yes, that means increasing interest rates. In November 2022, the aver- age 30-year mortgage rate is over 7%, and likely to increase. We spoke with Curtis Wood, Founder and CEO of Bee. The Bee Mortgage App is built on blockchain technology, AI, and machine learning, designed to lower mortgage costs. Working in Florida, Curtis says, “It’s still very strong in terms of supply and demand. There’s still quite a big demand for mortgages; however, the down payments tend to be higher. A few people have told me they could pay in cash and that if rates were higher, they probably would. But they want a mortgage because they’re protecting their cash, anticipating a recession or a correction in the market. These are seasoned borrowers, and they know that the market cycles. It’s done so their entire lives. And most of them are putting this in perspective, like in the early 1980s, when rates were 17% and 18%. They have seen this before. They don’t necessarily like it, but in the end, they’re financing less. But just about every one of them is in the mindset that they will refinance as soon as rates drop.”

Some people are opting for adjustable-rate mortgages to lower their interest when purchasing a home with the hopes of a refinance down the road. However, it is just as easy to refinance a fixed rate as an adjustable rate if you are nervous that rates will continue to increase.

“To me, it is normal for rates to be 6 or 7%, and it was very abnormal for a 30-year fixed mortgage rate at 2.9%. That was the lowest I saw it get, and that was primarily pandemic driven. It was an unprecedented time that we all lived through. If we haven’t hit the worst yet, I’d love to go through this as quickly as possible so optimism can return to the industry. But I really am optimistic that we’re close to turning a corner. I think 2022 will be the worst of it. And in 2023, it will be a very good year for everyone.”

“People are moving here because it’s a great place to live. It’s also a great place to retire. We live at the beach, and I’m only a five-minute drive from the beach right now. And what we have been finding now with the changing workplace is that, for the first time, we have many families moving here as well, which is really exciting. People are leaving New Jersey and New York City because Delaware is a great place to raise your family.

“I think probably across the nation, the market’s changing a little bit and prices are stabilizing. We recognized huge increases over the past year and a half. But along with that, we have also experienced material cost increases. So hopefully, all that’s going to start to stabilize and make it better for everyone. I don’t see home prices coming down but hopefully stabilizing."

With supply issues, anything from cabinets to windows can take longer than anticipated. Still, at Schell Brothers, Alyssa says, “Our mission as a new home builder is happiness, and we take great pride in that mission. Our goal is to make our customers happy. And we know they can feel confident that we’re not going to change prices on them.”

Delaware has no sales tax, and the property taxes are very low. Alyssa says, “In Delaware, it’s just a slower-paced lifestyle. And people here are nice — they take time to talk to you. At Schell Brothers, we pride ourselves in creating a great sense of community in our neighborhoods, and that’s very important to us.”

Tennessee

Delaware

Schell Brothers has been building homes in Delaware for 25 years and has expanded into Richmond, VA, and Nashville, TN. In 2022, Schell Brothers experienced their biggest year to date. They built over 600 homes, specializing in Delaware beach communities like Lewes and Rehoboth Beach. They have sold out of communities earlier than anticipated and are diligently working on releasing new communities in 2023. According to Alyssa Titus, director of marketing,

Over the last 20 years, Tennessee has seen a massive influx of homebuyers looking for great weather, low taxes, and outdoor living. Mark Hyder of Fairfield Glade in Crossville, TN, says, “Tennessee remains a strong destination for people relocating. At Fairfield Glade, lower taxes are one of the biggest drivers to people relocating here. Our local tax rate of 1.565% equates to $1,250 for a $400,000 home per year. When you tell that to people, most think that’s per month, but it is annual.”

Tennessee’s cost of living is 10% lower than the national average, and the sales tax is currently 9.75%.

“If a good house hits the market at a reasonable price, it won’t last long, and you could have multiple offers. However, it has definitely slowed this year. Like much of the country, we were going at such a frenetic pace that tapping the breaks improves the customer experience. It is a strong market here. The number of homes is still very low. And there are fewer homes selling at or above the asking price. As of the third quarter of 2022, homes spent an average of 26 days on the market. Homes in the $500,000 range are going very quickly, while those in the $800,000-plus range may take a couple of months.

“One thing we are seeing is that the mortgage rate increases have affected the amount people can afford. Last year they may have qualified for a $700,000 mortgage but can now only qualify for a $600,000 home. It affects how much they can buy; it’s not affecting if they are buying or not. If you

Georgia

“I still feel like we have great values down here; I feel like it’s one of the great holdouts,” says Lloyd Streit of Atlantic Salt Realty in coastal Georgia. “People want fairly mild winters and to be by the ocean. We have had a lot of cash buyers in recent years, so the mortgage rates don’t affect them much. But increased mortgage rates have pretty much caused the entry-level market to vanish.” have the need and the ability to buy, it’s still a good time to buy. Compared with rates from the last 20 to 30 years, the rates still are not that high. It’s competitive enough that you will lose out if you haven’t been pre-approved.

For those retirees on a fixed income who require a mortgage, Lloyd suggests thinking about it like purchasing a car. What is the monthly payment as opposed to the home’s cost? Think about what you want to pay, and then you can find a home that meets those requirements.

“I don’t personally view this as a bubble situation like 2008. It’s a different time. We just had a red-hot market that we had never seen before. And now, we may see a bit of correction. You’ll never buy a house at today’s prices again, but you can always refinance. If you are ready to retire, take advantage of the lifestyle opportunities that you can now. Some people may think they will wait for prices to fall. They keep checking back with us, and it’s higher than six months ago.”

“I think the market is going to tighten up a bit more. On the Georgia coast in the St. Marys area, prices got higher, but not extremely high. Right now, what you might perceive as a price reduction is that the home prices had outpaced the market. This might give the impression that it is a buyer’s market, but I’m not really seeing that. The homes were just poorly priced.”

“For buyers, they haven’t seen this environment in a while, so there will be better negotiating power. I see that rather than changing the asking price, some people have started to ask the sellers to pay down points on the mortgage.” Buyers may become more creative in their financing options. Many FHA and VA loans are assumable; check to see if you can assume a loan for an existing home.

Arkansas

According to Zillow, Arkansas is among the three most affordable states. The average price in 2022 for a home was $177,000. Kristen and Jon Kennon of iRealty Arkansas said, “People love to move here because Arkansas is just beautiful. It’s called ‘The Natural State’ because of all the hiking, canoeing, kayaking, rock climbing, and biking. We have a lot of land with a temperate climate and lots of lakes. A year ago, our median time for a house on the market was three days. Houses stay on the market a little longer, and there is more inventory now. But I still wouldn’t call it a buyer's market. We’ve recently started to see a slowdown.”

The population is just over three million, so there is lots of space for people and nature. The cost of living is 22% lower than the national average. Arkansas boasts more than 600,000 acres of lakes and 9,700 miles of streams and rivers. From the Ozark National Forest to natural hot springs, the beauty of Arkansas attracts retirees and families looking to make the most of their life.

Pennsylvania

“The last couple of years have been anything but normal. The real estate market really took off. I think it became a period of time for people in the country in terms of affordability with low interest rates and costs of materials and labor. So today’s a little bit of a new challenge with rising interest rates. Most of the buyers in the 55+ market are more financially independent, and many are cash buyers or take out a small mortgage. I think in a way that they’re a little bit more flexible in terms of the interest rates and how that affects their ability to purchase or refinance a home. Of all the markets, I think the 55+ buyer market is stronger,” says Eric Ziegler, executive vice president of Landmark Homes, an award-winning homebuilder in building communities in central Pennsylvania.

Eric continues, “I think in the 55+ market, a lot of them are kind of struggling with when’s the right time to buy? And,

I think those who had the flexibility to work from home could pull the trigger a little sooner. A lot of them would wait to retire before they moved. Many people who relocated to our area are from New York and New Jersey, and they will save a significant amount on their property taxes by moving to Pennsylvania. And, then the nice thing is, they are within an hour or two-hour drive back into the city or to family. It’s just a more relaxed approach.”

For over 25 years, this family business has helped people to create new homes and lives. “We have some great floor plans. And, when you come to our design gallery, you meet with our design consultants to select the finishes that fit your budget and taste. We have tried and true plans, but we always come up with something new. We pride ourselves in listening to the customer and providing a home they can appreciate and enjoy.

“I think we’re going to get to a place that’s a little bit more predictable than it has been. That being said, I think it’s still a great time to buy a house. A house is the place you live and is always a good investment. And, you know, it’s where you come home. It’s where you’re going to make memories and have family over. And a fantastic place and community is always a good investment.”

North Carolina

As one of the more popular states for relocation and retirement, the demand for real estate is still growing. According to Andre Nabors, a partner relations manager for the Economic Development Partnership of North Carolina, “The real estate market is still growing but not as rapidly as it has in the past. Inventory is low, and the market is still doing very well.”

Andre works with communities big and small throughout the state to promote retiring in North Carolina as part of ReitreNC.com. He says, "When people are moving to North Carolina, one of the biggest things they want is convenience, from the shopping to medical facilities to walking trails. The healthcare is some of the best in the country.”

“Even in small towns, especially those within a half or hour from the larger cities, are doing great. The mountains, coast, and Piedmont continue to attract families and retirees. North Carolina has made a concerted effort to attract retirees and an educated workforce. The state is very friendly to small businesses.”

South Carolina

“Everyone throughout the country from the Northeast, Northwest, and West wants to be a part of what’s happening in the Southeast. If we price the homes right, we will get close to the asking price. We are starting to see things leveling off at this time. People aren’t getting more than their asking price, but they are getting the asking price. We try to manage expectations of both buyers and sellers,” says Todd McDaniel of Bay Street Realty Group in Beaufort, SC. Inventory is still low throughout the South Carolina Lowcountry.

Todd says, “Existing home sales are stable as inventory is very low. Buyers want to be part of a community. Many are downsizing, but they want nice things in that home. They want to be close to town. They want cultural events, restaurants, and parks. Even with the rise in interest rates, we’re not really seeing a drop-off.

“Beaufort, SC, is featured in many articles as one of the top places to live. We are very fortunate here, and we are roughly half of the price of Charleston or Savannah for waterview properties.”

Florida

Although all areas of Florida differ, the demand for Florida properties remains strong. The migration patterns from the Northeast to Florida have been steady for the last 100 years. Ten of the top-selling Top 25 master-planned communities are located in Florida, with Lakewood Ranch in Sarasota topping that list.

However, when Ideal-LIVING reached out to K. Hovnanian®’s central Florida division, they indicated that they have inventory available for those looking to head for warmer winters and no state income taxes. According to Greta Akellino, they are starting to see some prices declining slightly for existing homes. However, in planned amenity communities, they may still see some prices increase.

Greta says, “We are seeing more people in our 55+ communities want to build their own homes. They aren’t willing to settle. For some, this may be their last home, and they want to choose what they want. Currently, it takes about eight to 10 months to build a home.”

International

The international market is booming as well. People have been flocking to Costa Rica, Panama, Belize, Mexico, and other areas. The pandemic provided a respite for many expats, and these areas are reaping the benefits of their great weather and lower cost of living. According to Mark Kilpatrick of Caribbe Luxury Real Estate in the Riviera Maya, “You get a lot more for your money here. The cost of living is just incredible. Also, property taxes are very low in comparison to the United States. We haven’t seen any effects of a slowdown here. We’ve been experiencing more people looking to come to live in Mexico. We have different categories of buyers, those looking for a vacation home, retirement, relocation, or investment. And some people purchase multiple properties. It’s about the lifestyle. I think the pandemic shed a new light on people’s desire to have a place where they can get away. And an international property is the perfect opportunity for some people. It’s about having something that pays for itself or can create an income while it's somewhere they can get away from it all.”

Senior Living

According to Will Purvis, president of Liberty Senior Living, “The senior population is growing exponentially and will continue to do so over the next few decades. Seniors want choices. Senior living communities provide an excellent way for older adults to simplify their lives by removing the burden of having to manage their homes and associated maintenance, coordinate service and care, while also providing the opportunity to become engaged with a plethora of services and amenities easily found in one location.

“Overall, we have seen growth in all of the care levels offered by Liberty Senior Living in our communities. Obviously, there are outliers in certain markets. I think most communities and organizations that are financially solid, reputable, and have a strong history are still able to grow in this competitive marketplace.

“As we all have experienced, inflation is affecting us all. The senior housing sector is no different. Our food and de- livery costs have increased, and the labor market is highly competitive. Here at Liberty Senior Living, we believe that providing excellent care for our residents is our greatest responsibility.

“The environment right now is challenging. We’re all feeling the strain as we buy gas or milk; unfortunately, we think that will likely continue. That said, we’re bullish on the future of senior living in the areas we operate and are investing in development and expansion. We’re particularly excited about our INSPIRE branded active adult projects that serve adults age 55+. This model offers a high-quality, luxury experience in a maintenance-free setting and, with our highly desirable rental model. The most attractive is that we achieve this at a lower price point. We do this by offering a simplified suite of services. We recently opened Inspire at Royal Park outside Charlotte, NC, and are in various stages of development for nine other projects throughout the Southeast, including Florida."

We invite you to explore this natural wonderland in a place where residents connect, forge friendships and pursue their interests and passions. There is truly nothing like it on the coast of Virginia.