Happy New Year, friends and neighbors! As we turned the calendar into a beautiful new year, we couldn’t help but make some predictions. Join us for a high-level overview of the local housing market predictions for 2023.
Housing Inventory & Pricing
In just about every corner of the country, demand outstrips supply. There are simply not enough houses available – we are down 22% inventory-wise from where we were in 2019 (pre-pandemic). New construction is struggling to keep up with demand, and a tight labor market isn’t helping. In 2023, we’ll start to see some improvement in this area, but probably not enough to sharply affect property values.
The media is doing its best to promote the housing crisis of 2008/2009 2.0 (when a glut of foreclosed houses hit the market). Every time I hear or read that I literally roll my eyes…This is SO not the case. People have much more equity in their properties, banks have been stricter on granting mortgages, unemployment is at all-time lows (especially in the trades which our area is heavy in), new construction costs have risen sharply due to supply chain shortages (still happening) and the lack of available labor talent (likely a permanent issue), millennials are entering the housing market in huge numbers and the great migration of the work from a high home hybrid is in full on swing causing a surge in midwest areas (Green Bay included in that trend). Suffice it to say the sky is NOT falling.
For these reasons and more, we don’t foresee sharp gains (or drops) in home prices. Instead, we predict a stabilization and leveling off. A healthy market has 6 months of inventory – we’re seeing just 1 month of inventory, in Brown County.
Labor Market Impact
The labor market continues to be tight, although we’re seeing some layoffs in specific industries, such as technology. But the industries that need workers the most desperately are construction and trade – and both of those are in a permanent state of a recruiting crisis.
To keep up with the housing demand, construction companies will need to get creative with a limited workforce. We just don’t see the residential construction industry catching up in the coming year or any year soon, which is why demand is going to continue to outstrip supply in most markets. This element is also what is contributing greatly to the high number of luxury sales…Existing homes provide much more value and oftentimes much nicer lots.
On a related note, wages are going up in most fields. It will be interesting to see how this piece of inflation affects the economy as a whole on a long-term basis. The employment rate is the wild card factor across the board.
2023 Mortgage Rates
Looking at a range of economic forecasts, we predict a settling out at an average of around 5.5% mortgage rate. The highest we saw in recent months was 7%. Don’t expect to see <3% ever again – that was a pandemic anomaly. Other options, like ARMs, make sense for a lot of families because most won’t be in their homes for more than 10 years.
We expect to see some creative products and mortgage options that are designed to help just about every kind of buyer. Lending has gotten quite sophisticated. People are driven by what their payment is these days…A variety of products are coming online to help people meet their goals. Some banks are now offering 40-year mortgages (not yet locally that I have seen)…Hmmm on that!
Relocation Drives Demand
People are on the move – literally. With so many companies adapting to a remote workforce, those employees can live anywhere. Where do they go? To areas with more affordable housing that is where. Extreme weather is also playing a role – hurricanes, temperatures, droughts, etc are driving people out of their home states, and into safer parts of the country (legit a real thing…we are hearing and experiencing it).
Housing affordability is a big issue in many pockets of this country. Here in the Midwest, our homes are (relatively) more affordable, and our communities are attractive to people looking to live somewhere with a more affordable cost of living.
For example, an average home that cost $150,000 in 2000 is now $600,000 in high-demand areas like Austin or Salt Lake City. In an average city, it is $400,000. In the Midwest, that same house costs $350,000. That’s a deal! I know people here think our prices our prices have gotten too high but other people coming in think it is crazy affordable.
What Does This Mean for You?
We are starting 2023 with a very stable housing market. As we look ahead to the next 12 months, we predict a more ‘normal’, calmer market (thank God!). Pricing likely will not take a big dip – although it might take a little longer to sell your house. Many people have removed themselves from the search, giving some breathing room to those who wish to take their time and choose the right house.
No matter what the market is or is not doing we are here for you to do what YOU need. Market conditions will always change. We are in it for the long haul and are here to navigate whatever the conditions are. We are adaptable and smart…Love that combo.
Overall – 2023 brings a welcome and much-needed change of pace, for everyone’s sanity!
Want to know what is happening with Sandra Ranck Real Estate? Are you interested in the local housing trends or want to know if it’s a good time to buy/sell your home? Do you want to learn all about the best shops, restaurants, fun events, and all the other hidden gems in the Northeast Wisconsin area? Our newsletter is a wonderful addition to your inbox with a variety of great information you don’t want to miss! Sign up here.