What To Expect From The Housing Market In 2023
Projected Real Estate Activity in The San Francisco East Bay
The first half of 2022 was notable in our area for ever increasing home buyer demand, a shortage of inventory, and ever increasing home sale prices with multiple offers being the norm. This unsustainable state of affairs came to a rapid halt mid-year due to rapidly rising mortgage rates and the result was a significant correction.
Historically low interest rates inevitable resulted in Inflation, which was identified as the major threat to the economy in 2022 and the Federal Reserve approach to the problem was to carry out multiple interest rate hikes starting in the second half of the year. As a result, mortgage rates more than doubled, which has never happened before in one calendar year.
Buying power was hit hard and consequently home buyer demand dropped off significantly. There was still a shortage of homes for sale but with less competition prices stagnated and some sellers had to reduce their prices in order to sell. Many buyers and sellers just put their plans on hold.
The East Bay market proved to be more resilient than that many parts of the country though, and values here look like they may be stabilizing now.
But what does that mean for 2023? Will the Fed introduce further rounds of interest rate increases? If so, will this cause home values to decline? Will we get to a point where inflation appears to be at an acceptable level? If so, we may see lower mortgage interest rates before the end of the year. We’ll have to wait and see but there is no shortage of predictions from economists, many of them being rather contradictory.
So for what it’s worth, here’s what some housing market experts are predicting for next year:
The most pessimistic forecast we could find is from Zelman & Associates, a boutique housing research firm, that predicts 5.1% depreciation in home prices through 2023. This contrasts with Realtor.com’s. forecast of 5.4% appreciation. Other predictions are less extreme in either direction and the overall consensus is that the market will remain flat through 2023.
It must be noted that this is a national viewpoint though, and as has been noted many times, real estate is local. The East Bay has always been one of the more sought after areas, and although higher mortgage rates are making it more difficult for some would be home buyers, even if mortgage rates stay at their present levels, I expect to see an active East Bay real estate market in 2023.
As a result, I anticipate seeing a considerable increase in East Bay home buyer interest from early 2023 which should result in a reasonable level of price appreciation through most of the year.
