Where are things headed in 2023? As we look at the local markets and the sentiment of buyers and sellers, here are our thoughts on the coming year.
INFLATION AND MORTGAGE RATES
Economists and armchair market watchers agree that inflation will be one of the big factors to watch in the coming months and it will dictate where the economy lands in 2023. We can feel prices softening in the housing market, at the pump, and in retail stores, and we expect that inflation indicators will catch up and reflect what we see in the marketplace.
If inflation does continue to decline, we expect that mortgage rates will also follow. More importantly, mortgage rates will stabilize. The rapid run-up of rates threw the real estate industry into a jumble and stability will help revive buyer confidence. In 2023, we are anticipating that rates will hover in the six percent range with more creative finance options becoming available as lenders compete for loans.
INVENTORY AND HOME SALES
Inventory is up significantly from where it was in May of 2022, however it has stabilized. So many homeowners have low mortgage rates that they are simply staying put. A recent analysis by Fannie Mae indicated that more
than 80 percent of existing homeowners with 30-year fixed mortgages in their portfolio have rates that are at least two percent lower than today’s rates. This will keep homeowners in place, keep inventory from ballooning out of control, and keep prices more stable.
And about inventory — a lot of the inventory on the market has been sitting around and that is not great. Many homes have defects, are iBuyer leftovers, or are cheaply done flips that are overpriced. The great homes still move (if they are priced right).
The number of home sales will decline in 2023 in large part because institutional investors and flippers (who once made up as much as 15 percent of our sales) are no longer participating as they were in 2021 and 2022 This year we will return to a more normal market in which buyers have some leverage and sellers will have to be reasonable.
CONTINUED GROWTH
We have written much about the growth of the Valley of the Sun and that growth will continue in 2023. The expansion of the TSMC and Meta sites, the growth of the semiconductor and electric vehicle industries, and our generally favorable business climate will continue to help us weather any storm clouds that lie ahead.
One indicator to note is that the Phoenix metro area saw a 31.7 percent increase in job posts for tech jobs in the past year. The job sectors in greatest demand include software development, data science, and software engineering, particularly in the healthcare, aerospace, and finance sectors. A solid local economy and good job prospects will be the chicken soup and coffee we need for 2023.
SPRING EVENTS AND SUNSHINE
Arizona shines in the spring and after three long seasons of pandemic cancellations and anxiety, 2023 should be a mega year for tourism. Barrett Jackson will kick things off the third week of January immediately followed by the Phoenix Open, Super Bowl, Spring Training, The Arabian Horse Show, and a ton of festivals and events. Our sunshine, golf courses, and outdoor activities remain a great lure to those freezing in other states.
A RETURN TO NORMALCY
Shutdowns, low rates, stimulus money, drive-thru Covid tests, crypto craziness, Zoom school, supply chain madness, stock market volatility, endless lines at Gucci, intense elections, rapid inflation, staffing challenges, and an incredible increase in property values have made these past three years quite the wild ride. We hope that 2023 will offer a more balanced approach so we can all catch our breath and get back to basics once again.
John and Natascha Karadsheh are co-owners of KOR Properties, a boutique real estate brokerage serving the Valley of the Sun.
John is the Designated Broker of KOR Properties and has been a Multi-Million Dollar producing agent for over 20 years. He is an Accredited Buyers Representative (ABR) and Certified Residential Specialist (CRS), and serves on the Arizona Regional MLS (ARMLS) Rules & Policies Committee, ARMLS Appeals Committee, and the West and Southeast Realtors of the Valley Professional Standards Committee.
Natascha is a Multi-Million Dollar Producer and Accredited Buyers Representative (ABR). She is the Founder of Mesa Food Truck Fridays, a Member and Past-Chair of the City of Mesa Economic Development Advisory Board, and on the Board of Directors of the Greater Phoenix Economic Council.