Three real estate agents discuss what buyers and sellers can expect in the 2023 housing market.
Last year’s real estate market blindsided brokers, says Phyllis Ghazi, Principal Broker at More Realty, who sells homes in the greater Portland market. The Federal Reserve raised interest rates to counteract inflation – going from 2.8% in January of 2022 to 6.36% in October — causing potential buyers to leave the market, and creating relatively high backlog of housing inventory.
On Wednesday the Fed raised interest rates for a eighth time, despite inflation slowing down.
According toRE/MAX National Housing Reportreleased in January, the Portland housing market saw a 32.3% decrease in home sales and 38.1% reduction in new listings between December 2021 and December 2022. The numbers are consistent with state and national housing market cooling. According to November housing data released by Realtor.com, the national housing market continues to have higher inventory, fewer pending listings, and a slower pace of price growth and sales.
Phyllis Ghazi,Principal Broker at More Realty
Ghazi says for some of her group’s 900 agents, it was unlike anything they had seen in their careers.
“When I got into the business in 2001, you actually had to know how to sell a house. Then 2013 comes around, and all you had to do was put up a yard sign and pictures on the internet, and you had a bidding war in a week,” says Ghazi. “Some of the newer agents had never experienced anything like this before. Even I had to go back through my notes on how to sell a house,” she jokes.
In order to have a balanced market in real estate, one which favors neither the buyer nor the seller in transaction, the general consensus among brokers is you need to have five to six months of supply. The state hasn’t had that level of inventory since 2012. But Ghazi says the Federal Reserve’s interest rate increases to head off inflation took many buyers out of the market.
“By end of the year, when the Fed made their fifth increase, we had so many buyers leaving the market and it was affecting our realtors, and my personal business. That was the worst year in commission sales I’ve ever had, and I’ve been a realtor since 2001,” Ghazi tells Oregon Business.
OB asked three Oregon realtors for their predictions on how the 2023 housing market is shaping up.
Prediction #1: Higher Inventory Means Prices Will Stay Stable
Lynnea Miller, principal broker at Bend Premier Real Estate, says while the increase in inventory is significant compared to years past, the market is still not close to balanced. She says declining home prices are moving in the right direction, but prices are still too high for many people who want to buy a home to enter the market.
“To give you an idea, in 2021 we had half a half a month’s supply. We’re talking for two weeks, two and a half weeks. In December of 2022, we had 1.8 months of supply. So, we’re talking three times four times what we had before, but nowhere near balanced,” says Miller. “Prices have moderated some, but they’re nowhere near pre-pandemic levels. As a result, the houses that are on the market are still out of the price ranges of a lot of people.”
Lynnea Miller, principal broker at Bend Premier Real Estate
Teresa Moshofsky, a broker at Equinox Real Estate in Eugene, says she is telling sellers to expect to get around 97% of asking price. She anticipates prices will remain generally stable for the near future, and not to expect the kind of drastic market fluctuations of last year.
For those buyers who are able to enter the market, she says the higher inventory puts buyers on slightly more even footing.
“For the last two years, you often had to waive your inspections, take a leaky roof, and offer way more money than the asking price. It’s still very much a seller’s market, but I would say it’s a steadier seller’s market,” says Moshofsky.
Prediction #2: Slowing Inflation Means More Buyers, And Work for Clever Lenders
Ghazi says now that the Fed has inflation more in check, buyers will be coming back into the market, and lenders will be busy with refinancing, when interest rates drop.
“We have a saying in my field — it’s kind of repulsive — which is, ‘Marry the house, date the rate.’ The last time I talked to my lender, people applying for mortgages went up 28% since the last time the Fed met and adjusted the interest rate,” says Ghazi.
“Lenders are going to be slammed because they’ll have new mortgage applications for buyers entering the market, and they’re also going to be busy with refinancing rates from when people bought in 2022,” Ghazi says. “That’s going to hit them all at once.”
“I don’t think the interest rates are so out of whack that it will prevent people holding back for too long,” Moshofsky says. “I think we’re going to have a very steady market this year. I’m getting ready to gear up for a lot of business.”
Miller says that with home prices staying high, lenders able to come up with innovative lending solutions could give them a leg up on the competition as the market cools.
“I’ve seen creative financing coming out of lenders,” says Miller. “Things like buydowns, where the seller may assist the buyer in their first year through a concession, and the interest rate goes up in succeeding years. It’s a great program to help entry-level homebuyers be able to afford a home for sellers who really want to sell and there’s more competition.”
Prediction #3: Supply Chain Issues Will Continue Driving Up Construction Costs
Last year, supply shortages from China left new constructions without fridges, microwaves, dishwashers and other appliances. Ghazi says the state of Chinese shipping and manufacturing as well as supply chain issues in the timer industry will continue to drive up the costs of new constructions.
“COVID-related supply chain issues affected builders considerably because they couldn’t get appliances out of China. Supply chain issues also affected lumber, which increased the cost of new construction.” says Ghazi. “We anticipate that that will continue. Builder permits are down. We’re not going to see as much new construction where there can be new construction.”
She says the high cost of construction means new buildings will likely be smaller, and in places like Aloha, Hillsboro and Estacada.
Prediction #4: Sellers Will Need to Account for Multiple Living Situations
Miller says with average home prices being so far above many people’s purchasing power, some home buyers are joining forces financially with family members, making arrangements to live multigenerationally – pooling resources in order to afford a house.
“I’ve heard of family members, brothers and sisters, joining forces to be able to buy a home together. I know multigenerational families are pooling resources to be able to afford something, or older family members assisting younger, adult children,” says Miller, who says she expects these trends to continue for as long as housing remains out of many family unit’s price range.
Ghazi says amenities like accessory dwelling units, which allow for privacy and separation, will be of particular interest to more people looking to live alongside family.
Prediction #5: More Affordable Housing Options Will Come Online
Miller says that a small number of middle housing units are slowly coming online, and that their presence is giving some buyers previously priced out of the market a chance at owning a home.
“There’s pockets of new housing coming in that are more affordable. We’re talking condominiums, townhomes, and homes on zero lot lines, which are very, very small lots you put a house on,” says Miller. “There are also opportunities in places like Redmond and the La Pine and Prineville, though the ultimate goal for homebuyers though, is to be in those markets it’s harder for homebuyers to break into.”
Because of Portland’s urban growth boundary, Ghazi says new construction in Portland Metro consists of tearing down an existing unit and putting a new unit it its place. For this reason, she expects anyone doing new buildings in Portland to divide lots to get the highest return on investment.
“In Portland, people who are doing new stuff are separating their lots if they can, and the city’s allowing that because of the urban growth boundary, and they’re changing the city change the zoning regulations to allow for more of that,” Ghazi says.
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