As we near 2023, here are some hot topics regarding the real estate market
Over the last three years, many real estate markets saw record-high home prices. As the interest rates continue to rise, there are many questions regarding the housing markets across the country heading into 2023. Many buyers and sellers wonder if these high prices will stay consistent or continue to increase.
Here we cover some questions that many have about the future of the real estate market and how it may affect relocation programs next year:
What Caused Home Prices to Rise So Much in the Last Two Years?
The short answer is high demand and low supply. According to the Federal Housing Finance Agency (FHFA) Home Price Index, the national average on home prices went up 15% in 2021 and 9% in 2020. Historically prices have only grown about 5% each year until then.
Because of the historically high demand, the Federal Reserve drove down mortgage rates and borrowing costs to record lows to better support economic activity. The thought was to make monthly payments on expensive homes more manageable. But while that was happening, the number of homes for sale declined as many people were waiting out the Covid-19 pandemic and its effects on the market.
What Will Happen with Home Prices in 2023?
With a rise in mortgage rates, we have seen new and existing home sales slow down considerably. According to the National Association of Realtors, existing home sales were down almost 20% when compared year over year. At the same time, median home prices sold somehow went up 7.7%.
Demand may have slowed in most major markets, but the number of homes for sale continues to be at historic lows. Experts predict that the national average home prices could continue to rise, but if so, it will be much slower than in the past two years. For 2023, the Mortgage Bankers Association (MBA) and Fannie Mae predict existing home price growth of 3.1% and 3.2%, respectively.
In summary, potential buyers might not have to deal with as much competition, but property appraisals are likely to remain high.
Will there be a housing market crash similar to 2007–08?
Experts will say that they do not see the market conditions as a “housing bubble” compared to 2007-2008. During the period leading up to that bubble burst, too many mortgage companies were greenlighting buyers who did not have financial positions to manage monthly payments. Back then, many home loans were made with no money down on the property, so the buyers did not even have equity in the property.
As the home prices eventually declined significantly, this made it easier for the new homeowner to walk away from the house, which created the crash. But today, mortgage qualifiers have much stronger credit profiles and equity in their properties. According to the New York Federal Reserve, most home loans made over the last two years have gone to those with high credit scores of 760+ rather than the low scores of the Housing Bubble period.
In addition, the housing market in 2007 had a surplus of homes for purchase in the decade before the COVID-19 pandemic, but new home construction did not keep up with the demands of a growing population.
With the price increases, is housing affordability an issue for the U.S. economy?
The high cost of housing and increasing mortgage rates make it difficult for more people to afford a home. This has been a problem in the economy for several years, with the lack of affordable housing being an issue since the Great Recession. As the supply of homes becomes tighter, builders are incentivized to construct larger homes with more significant profit margins. With an increase in the availability of these higher-priced segments, builders have slowly begun moving down the price-point scale.
GMS Is Always In the Know On the Housing MarkeT
Global Mobility Solutions (GMS) always stays up to date on the real estate market in almost every need within the US, and most international market trends. Our dedicated real estate team works with the best relocation real estate agents and mortgage brokers to assure excellent service and outstanding home sale and buying assistance programs.
On top of that, our corporate housing providers are all thoroughly vetted before being passed on to clients. At GMS, we understand that the up and down housing market can be a big reason why an employee might decline a relocation assignment, which is why we do everything in our power to get them from point A to point B without going into financial distress over their home sale or home buying portion of the relocation process.
For more information on our real estate case studies or other industry trends regarding global mobility programs, feel free to reach out to us today for a free consultation. Our award-winning relocation team is ready to answer any questions you may have.
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