“Home sales will be down about 8% to 12% for 2023 compared to 2022, and the year will be 1982 again.”
This firm and worrying forecast is the main one made by real estate broker/Lamacchia owner, Anthony Lamacchia, in his annual report on real estate market forecasts, published on December 29. But he also warns that there’s no reason for agents and brokers to think they can’t excel yet.
For those too young to remember the specifics of the 1982 market, says Lamacchia.
“I clearly expect a scenario of the early 1980s, when inflation soared leading to soaring interest rates, including mortgage rates,” he says. “It’s amazing how history repeats itself, but with nuanced differences.
“People keep comparing what’s happening with 2008, but that’s not the case. At that time we had an extreme overabundance of sellers and not enough motivated buyers. Right now, there are probably not as many buyers as there have been in recent years. But there’s also a lack of sellers because people are reluctant to give up their low mortgage interest rates.
The company operates in New England and South Florida, but Lamacchia notes that its predictions and observations apply nationwide on many levels.
“While real estate markets may vary from local market to local market, the majority of overall market trends are happening everywhere on a larger scale right now,” he says. “Much of this will likely be applicable to your market, unless you’re in a unique location with peripheral factors.”
Lamacchia told RISMedia that one of the main factors he based his grim predictions for 2023 on was what was happening in Ukraine.
“The war has driven up fuel prices,” he noted. “Yes, they’ve come down, but they’re higher than they should be. So as long as that happens, it’s going to continue to put upward pressure on inflation, which keeps upward pressure on interest rates.
Interest rates drive mortgage rates up or down with them, and 2022 has been a story of two halves, with the first few months of the year seeing rates around 3%, boosting home sales at a blistering pace. . In the second half of the year, as Lamacchia points out, rates skyrocketed to over 7%, pushing many potential buyers out of their comfort zone. It also cooled inventory levels.
“Homeowners stuck in rates between 2% and 4% don’t want to move away from it, and they will only do so if they have to,” he says. “As a result, most potential sellers are on hold. I believe we will see this continue over the next 18 months. Of course, with life changes, such as growing families, empty nests, illness, divorce, retirement and moving for careers, as well as first-time buyers, of whom there is a constant new supply, the need for real estate transactions will never stop. .
“As a result, real estate, despite delicate market adjustments like this, never comes to a complete halt, but it has slowed. Nationally, I expect less than 4 million home sales We haven’t seen home sales this low since 2011, and we might even beat that and go lower.
House prices are slowly rising
Lamacchia estimates that at some point in early to mid-2023, he sees home prices begin to balance out from a year earlier, followed by a slight decline.
“A year from now, when we measure 2023 as a whole, I think prices are going to be down somewhere between 3% and 3% up, and that 6% change, for all intents and purposes, is basically flat and should be the welcome”, he says. “A shift towards equilibrium is exactly what is needed. Honestly, prices that drop more than that would be healthier for the market, because affordability has just gotten too out of reach for buyers.
Breaking it down by quarters for 2023, Lamacchia estimates that around January through April, multiple offers will return and many buyers will wish they had purchased last fall. He then feels that things will start to balance between buyers and sellers from April to July. Home sales will be down during this period compared to the same period in 2022.
“July through September will see more homes listed, and these sellers will be mad that they can’t sell for what they’ve seen their neighbors sell for those who listed in the winter and early spring,” he says. -he. “Fall will decelerate like last fall and sales will be flat compared to 2022 to end the year.”
When it comes to mortgage rates for 2023, Lamacchia is not part of the chorus preaching a drop.
“There’s a lot of optimism around how quickly rates will start to come down to a more desirable level, and over the last six or seven weeks they’ve kind of settled into the mid-6s, which is good news. ,” he says. “Many mortgage experts disagree with me and are convinced that rates will continue to fall as inflation appears to be receding. I am not convinced that inflation is as good as recent reports indicate.
“I predict that in about a year, rates will be lower than they are now, but getting there can be a little painful. Buyers should keep this in mind, as well as the fact that there are creative mortgage options.”
Ever the optimist, Lamacchia remained convinced the industry was strong when asked what he was telling his agents as they geared up for 2023.
“There are still a lot of houses for sale. That’s my answer,” he said firmly. “I mean really…choose a place like Massachusetts.” There are still 75,000 homes for sale. So if we are good, we will have a lot. Renters, potential sellers, and buyers will all eventually get impatient and tired of waiting, and they’ll walk out and get the home they need. The show cannot and will not stop. The real estate fair is still going on.