At the beginning of each new year, we reflect on what we saw in the previous year, what we can learn from last year, and what we expect to see in the year ahead. See below for some thoughts…
WHAT WE SAW IN 2022
Real estate in 2022 can be described briefly as ‘the tale of two markets’. If you split the year by its midway point, each half would be vastly different. The first half of the year was one of the most competitive and fast-paced markets I've seen in my 12+ years of selling real estate in Boston. As we got into the late spring, mortgage rates shot up quickly, changing many buyers’ affordability and budget and abruptly stalled the market – causing the second half of the year to become significantly slower, although not a crash as some believed.
WHAT WE LEARNED IN 2022
Just because a home hasn't gone through several price reductions doesn't mean you can't negotiate them down. We saw some buyers target the homes that had been sitting on the market the longest, offering to buy them at prices below market value, and getting some of the best deals we've seen buyers get in a while.
The Adjustable Rate Mortgage (ARM) made a comeback as buyers' affordability changed as a result of rapidly rising interest rates for 30-year fixed mortgages. By the end of 2022, nearly 1 in 4 mortgages were an ARM product.
Realtors, buyers, and sellers alike had to get realistic about expectations. Seller’s who thought we were still at the height of the seller's market and price too high missed their mark and had properties sit for a while. Meanwhile, buyer’s who thought they would wait to scoop up foreclosure properties (circa 2009) may have missed out on some deals from Aug-Dec, and potentially already missed the bottom of the housing market.
WHAT WE EXPECT IN 2023
The new normal with higher mortgage rates is here to stay (for a while). We anticipate the average 30-year fixed mortgage rate to hover around low 6's with a slow decline (and occasional incline) ending the year probably closer to the low 5's. If you are waiting for those rates to hit 3% again, who knows when we'll see that, if ever.
2023 will likely be the year of the first-time home buyer. It was incredibly challenging for first-time buyers to get homes over the last 18-24 months as bidding wars pinned them against experienced, wealthier buyers. For the buyer who wanted to wait until they could negotiate and not give up protections like home inspections, this will be your year.
Inventory will stay low. While first-time buyers enter the market, many step-up buyers will sit it out. Having locked in rates at 3% or lower over the last couple of years with their purchases & refinances, homeowners moving from one home to the next will think twice about their next purchase.
The "housing crash" will not be with the pricing but rather the number of homes selling. We will likely experience the fewest amount of homes sold in roughly a decade due to the combination of low inventory mixed with higher interest rates. Pricing on the other hand for the greater Boston market will likely still rise, although at slower rates, or at the very least stay relatively flat. We don’t anticipate prices to taking a nosedive.
If you have any specific questions about the housing market or your home, don’t hesitate to reach out. We’re here to help.
Cheers to 2023!
- Sam & The RP Group