Last week the National Association of Realtors®’ (NAR) annual convention took place in Orlando, FL. Each year this meeting is attended by some of the brightest minds in the real estate market, including real estate agents, brokers, and economists. As is typical, there was much discussion about the future of the housing market and what to expect. As part of this discussion, some of the top challenges expected in 2023 were discussed. To quote William McCarthy, 2023 global chair of the Counselors of Real Estate, both the residential and commercial real estate markets face an “extraordinary era of unpredictability”. We share some of the top challenges ahead for the real estate market.
Top challenges in 2023
- Mortgage interest rates: Of course, we can’t discuss real estate market challenges without discussing the rapidly rising mortgage rates. Compared to just a year ago, mortgage rates have more than doubled. This has resulted in essentially 18 million households being priced out of the current housing market.
- Inflation: While we hope that inflation is stabilizing some, there is no doubt that the 40-year high inflation we have endured this year has impacted the housing market and will likely continue to do so in 2023. With virtually the price of everything from fuel to groceries going up, this is essentially an extra tax on Americans. This is likely to continue in 2023, which will greatly impact Americans’ ability to save for home purchases.
- Housing inventory and imbalances: A lack of homes for sale has been a constant theme for the real estate market for some time now. To further complicate this, many homeowners are opting not to sell in this market in order to preserve their super-low mortgage rate. At this point, buying a new home would result in a new mortgage rate that could be double or triple what they currently have. The lack of inventory also applies to rental properties. In fact, studies estimate that more than 4 million new rental units nationwide will be needed by 2035. These challenges will persist in 2023.
- Labor shortages: During the pandemic we saw “The Great Resignation” unfold. In addition, we have also seen lower birth rates during the past several decades. As a result, we have a mismatch between the number of job openings and available workers willing to fill them. This is particularly noticeable to the real estate industry in the home building sector. At a time when we need more construction of new homes, we do not have enough laborers to fulfill the need. This will persist throughout 2023.
- Supply chain disruption: Although supply chains have improved from levels seen in 2021, we still see bottlenecks that are impacting new home construction, renovation projects, and home repairs. Of course, geopolitical risks such as COVID-19, the war in Ukraine, and persistent cybersecurity threats will continue to impact markets in 2023.
Overall, we expect some similar headwinds for the real estate market to persist in 2023. With this said, the South Florida market has fared better overall when compared to the rest of the country. While the housing market is transitioning and buyer activity will continue to decrease across the nation, the persistent demand for South Florida housing should help offset some of the slowdown. For many investors, this may be a great time to add a property to your real estate portfolio. With fewer Americans being able to buy a home due to rising high home prices, rising interest rates, and persistent inflation, the demand for rental housing should remain quite strong.
Are you ready to invest in South Florida real estate? We can help! Contact Natasha at Live South Florida Realty, Inc. today! Get access to the complete South Florida MLS right on your mobile device by downloading the Florida Home Search app too.