I hope everyone is having a great start of the year in 2023!
Challenges and the chance to continually learn in different market conditions are what make my job interesting. The real estate business is a window into the broader economy. I am gratified to have had the opportunity in 2022 to work with clients, both old and new, on purchases, sales, rentals and property management. Despite the headlines, there were still good opportunities for those able to navigate a volatile environment. I want to thank you for the referrals, your business and all the trust and support!!
I will remain laser focused on helping my clients with their real estate goals, providing them with exceptional, personalized service and to be your go-to source for real estate industry insight and advice.
General Market Overview (2022)
Every year presents its own challenges for U.S. real estate market participants. In 2022, the greatest of these was the dramatic rise in mortgage rates. This was the result of the Fed tightening the fed funds rate more sharply than it had in four decades in response to much higher than expected inflations.
Key factors in 2022 that impacted the U.S. housing market:
- Russia invaded Ukraine on February 24. The market reacted to the invasion immediately.
- Beginning on March 17, the Federal Reserve raised the target federal funds rate at a shockingly fast pace from 0.25% to 4.5% (December 14), which in turn caused the thirty-year home mortgage rate to increase from ~3.5% to 6.5% over the same period.
- High inflation, which peaked in June at 9% on a y-o-y basis, and a tight job market.
- Continuation of the Metropolitan Washington region’s longstanding deficit in new home construction, which contributed to a continued supply-demand imbalance. For example, in the twelve months through November the median home sales price in Fairfax County still increased 5.8% despite lower volume.
What I saw throughout 2022:
- An extremely competitive housing market early in the year.
- A slowdown in market activity that began after the Fed’s rate hikes on May 7 (50 basis points) and June 16 (70 bps) and through the rest of the year.
- New fears that there is a housing bubble in the region and that there will be a recession.
- Volatile mortgage interest rates and housing prices. I was never bored as the market shifted every month and even, during certain periods, every week!
- Home buyers and sellers postponed their plans due to the unpredictable housing market and economic environment. This caused inventory shortage, which somehow balanced out the decrease in housing demands.
What some experts are saying about the 2023 housing market:
- Although some commentators expect a housing market a crash in 2023, the consensus view is that there will be a softer, albeit still painful landing before an expected uptick in 2024.
- In general, experts predict a more balanced market with little change in housing prices, a continuation of the recent decrease in mortgage interest rates after the rapid rise this year, and a marginal bump up in inventory that is not sufficient to meet affordability challenges.
- High homeowner equity and a resilient job market will stave off a wave of foreclosures.
- Fannie Mae is expecting a “modest recession” in 2023 with GDP growth declining 0.5% before the economy expands by 2.2% in 2024.
- Lawrence Yun, chief economist for the 1.6 million member National Association of Realtors, expects the rate to settle at 5.7 percent as the Federal Reserve slows the pace of rate hikes to control inflation, which will still be well below the pre-pandemic historical rate of 8 percent (announcement). Yun anticipates existing-home sales will decline 6.8 percent in 2023, to 4.78 million.
- Taylor Marr, deputy chief economist at Redfin, anticipates that building permits and housing starts will drop about 25 percent in 2023 with most of the pullback in single-family homes: “Construction of single-family homes surged during the pandemic, which means builders need to offload the homes they have on hand without adding more supply to limit their financial losses.”
- Median price range homes are selling fairly fast, for example 500-700K townhomes, new construction condos.
- More showings. We started to see more showing activities on listings
- Buyer confidence in the DMV housing market is higher than last fall and winter. Buyers are resuming their home searching activities. For example, we are seeing more buyers at Open Houses than November and December last year; receiving home buyer’s calls and inquiries indicating they are searching and need help, etc.
- Interest rates are improving, and more creative residential home loan programs are available for home buyers.
So, if you are thinking of buying or selling, you might not want to further delay your plan, as buyers are already out looking! Reach out to me for any of your real estate questions.
Contact me at [email protected] / 703-677-0709