Even though national GDP contracted for the second quarter in a row and home sales have fallen for five straight months, property prices are likely to continue growing because of low inventory, Lawrence Yun, chief economist for the National Association of REALTORS®, said Wednesday during NAR’s quarterly Real Estate Forecast Summit. Yun offered his economic and housing market predictions for the remainder of this year and into 2023 at the event.
One of the most unusual aspects of the current economy is the labor market, Yun said. There were more job openings than unemployed people in May—with the difference being nearly two to one, according to Bureau of Labor Statistics data. Construction job openings were at a record high in January, and these unfilled jobs point to a potential slowdown in the housing market, Yun said.
Both existing-home sales and pending home sales have been falling or stagnant for months, NAR data shows. Rising mortgage rates have combined with low inventory to exert downward pressure on the market. “Closing activity will continue to sink even more,” said Yun. “Some [potential home buyers] don’t want to pay higher monthly rates. Others can’t.”
Hope for Consumers
There are bright spots in the market, such as gradually increasing inventory, which is good news for consumers. “They no longer have to make an offer after seeing only one [house],” Yun said. “They can see three or four. It’s returning to a normal process.”
Despite some homes with high list prices beginning to languish on the market, the overall lack of inventory is still leading to price gains. “Even after reductions, prices are still higher compared to one year ago and much higher compared to before the pandemic,” Yun added.
Though the Federal Reserve is expected to hike interest rates several more times this year, Yun said mortgage rates won’t rise much further because lenders have already priced in the potential increases. This can mean increased opportunity for consumers. “We may be topping out independent of what the Fed will do,” Yun said. “Rates will go a little up and a little down. It may be a good idea to lock in when the rates are down.”
He also noted that foreign investment in U.S. real estate is still well short of pre-pandemic levels but predicted that international interest is likely to increase as travel restrictions ease.
Finally, Yun predicted that in 2022, total home sales will be down 13% from the previous year, home prices will be up 11% and total dollar volume will be down 2%. For 2023, he predicted no increase in home sales, a 2% hike in prices and a 2% increase in dollar volume.
Current Trends and Market Opportunities
Jessica Lautz, NAR’s vice president of demographics and behavioral insight, also provided data from the June REALTORS® Confidence Index. Among her key findings:
- Median days on market for homes nationwide hit a record low of 14.
- The average number of offers per property dipped to 3 from a previous high of 5.
- Approximately 30% of buyers are waiving inspection and appraisal contingencies—a number that has held fairly steady since the start of the pandemic.
- The share of all-cash buyers currently stands at 25%. This number has actually decreased from a high of 35% in 2014.
- First-time buyers are still being sidelined and make up 30% of the market. Historically, they make up around 40%.
In addition, Lautz offered five “touch points”—opportunities for REALTORS® to reach out to clients in the current climate.
- Twelve percent of buyers are purchasing homes virtually—and they want a REALTOR® to assist with the process.
- Remote work continues to influence buying trends: 34% of buyers want features that enable them to work from home.
- Consumers continue to have a skewed view of the typical amount required for a down payment. Thirty-five percent of buyers believe a down payment of 16% to 20% is required; 10% of buyers believe they need a down payment of more than 20%. However, the typical down payment for a first-time buyer is only 6% to 7%. For a repeat buyer, it’s 17%.
- There is value in promoting energy efficiency in listings: Forty-four percent of REALTORS® say it’s “somewhat valuable,” and 19% say it’s “very valuable.”
- Seven in 10 buyers report a desire for the latest in heating and cooling, windows and doors, insulation, lighting and appliances; however, the typical home purchased is 29 years old and unlikely to have the newest features. This disconnect presents an opportunity for REALTORS® to contact previous clients about satisfaction with their current home and any improvements they have made.
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