The past year has seen some drastic changes in the real estate market. The month of January saw the final moments of super-low mortgage interest rates below the 3% level. In fact, these incredibly low rates supercharged the housing market from approximately August 2020 through January 2022. In addition to these low rates driving up buyer demand, we also witnessed possibly the greatest pandemic related impact on the housing market yet – the virtual workspace! With the shift towards social distancing, Americans across the country were looking to leave the big cities in favor of the suburbs which provided more space in the home as well as outdoor space. From March 2020 to October 2021, approximately 67% of Americans relocated to a new home. Of course, this was all made possible due to the broad adoption of the virtual workspace. No longer having to commute to a corporate office meant that many geographical boundaries were removed. In fact, nearly 40% of Americans stated that their move was motivated by the ability to work remotely.
Fast forward to the present time and we have seen mortgage rates more than double, essentially pricing out many would be home buyers. This has resulted in many homes sitting on the market for long periods of time and ultimately slowing down the housing market to a crawl.
Recent historical dollar volume for real estate transactions
|Year||Dollar Volume (Billions)|
|2022 (through Q3 2022)||$179 Billion|
Stabilization ahead for housing
A recent survey found that 85% of U.S. homeowners with mortgages currently have an interest rate less than 5%. Needless to say, the low mortgage rates are an incentive for these homeowners to stay in place as opposed to buy another home and have to obtain a mortgage rate that could be double what they are currently paying. The silver lining for buyers in this market is that with these significantly higher mortgage rates, they will likely see less competition from other buyers in the market. Ultimately, we should expect to see more sanity in the housing market in 2023. In other words, the days of full price offers that waive contingencies and home inspections should be mostly behind us. In addition, it is quite unlikely that we will see nearly as many homes selling in bidding wars for tens of thousands over asking price. Home sellers will need to be able to practice patience as homes will likely remain more difficult to sell as showings become harder to obtain.
All in all, we expect 2023 to be much like what we have seen for the past 6 months or so. Of course, much of the direction of the housing market will be dictated by larger economic factors. For starters, if inflation can begin to decrease then it is possible that monetary policy adopted by the Federal Reserve can begin to ease. This could ultimately see some slight decreases in interest rates. In addition, if we are able to avoid a recession then this could also have some significant impact on the housing market. In markets such as our’s in South Florida, we should continue to fare better than many other parts of the country. Perhaps no other state in the country has benefited more from the remote working environment than Florida. Many Americans in higher cost of living states with less sunshine have begun to migrate south to The Sunshine State!
Are your ready to move to Florida? We can help! Contact Natasha at Live South Florida Realty, Inc. today! Also, be sure to download the free Florida Home Search app for your smartphone or tablet as well.