Aside from rising interest rates, experts are siting other factors when it comes to the real estate market for both sales and refinancing decisions in 2023. Mitch Roschelle from Macro Trends Advisors, for instance, told Fox Business News this week that the current downcycle on residential real estate prices are also based on American’s uneasiness when it comes to the economy.
For the middle market, the economy is not judged by the stock market…. a key factor as Americans assess individual wealth, but also how Americans feel about their personal employment certainty. Announcements of major layoffs may not impact the stock market as much in 2023, as there was a 20% market drop in 2022, but it could impact housing more than previously thought.
While many experts have stated that the real estate market has shifted to a buyer’s market, the supply level is also quite low as owners that are not in desperate circumstances have decided to stay put. Since supply has not increased, there is still sporadic bidding wars for specific types of properties.
Supply has yet to increase substantially, which may have stalled an even deeper market correction. Home prices are expected to drop even further as the average home increased in value by about 35% over a two 2 ½ year period with the pandemic being the catalyst.
From its high, many experts are predicting a decrease in price of average homes between 10% and 15%, and perhaps more in key markets where the increase over the last three years was more than 40%. Home sales dropped by more than 7% in November, consistent with the trend. The correction would be consistent with the recent stock market correction.
Still, interest rates are one of the key factors. The Fed started 2023 out signaling they are determined to curb inflation through interest rate hikes for the foreseeable future.