Boehm Nolen Group's Predictions for 2023
As we wrap up 2022 and look toward the New Year, we find ourselves creating goals and setting expectations for an upcoming year that is certain to usher in many changes in our market. As we peer into our crystal ball, we have decided to share with you all that we see...
Supply/Demand
We believe both will decrease next year. The rising interest rates have pushed our casual buyer out of the market and some are not able to afford what they could this time last year. For example, someone who wanted a $5,000 a month mortgage payment could pay around $1.2M, and now, for that same payment, the buyer is looking at houses more in the $950k range. Another reason we believe supply will stay historically low is due to the refi surge that so many homeowners took advantage of in 2020-2022. These sellers are more hesitant to make a move when prices are strong and rates are high. While not ideal, it will make pricing all the more important.
Pricing
The media's persistence about prices dropping has not been lost on us. We have seen articles that predict massive price corrections (see here) and others that paint a less drastic picture for the coming months. One thing is constant, the massive gains we have seen will slow. Most articles out there are based on national predictions, and it is important to remember that the markets locally aren't typically as tumultuous as some of the other areas that skew the national average. Remember that in the worst real estate crash in modern history, we saw about an 8% drop in pricing locally. Birmingham does not suffer swings, appreciation or depreciation like larger markets.
Interest Rates
Whether the feds over correct for inflation or don't correct enough, either way in 2023 we believe interest rates will continue to drop, but not below 5%.
Expectations
Overall, we expect the decrease in supply to outpace the decrease in demand. We expect prices to remain stable and maybe slightly increase over 2023, but at a lesser appreciation than we have seen the past few years. We expect buyers will have more time, and in some cases, options, to make less hasty decisions. This includes normal inspections and other contingencies that were deal killers in the past. Overall, we expect less transactions across all markets with prices holding steady.