While the boom in housing prices right before the pandemic is still fresh in people’s minds, I have noticed the current fluctuation dip and rise again is throwing folks on edge. During the pandemic, prices dropped significantly. Yet as soon as the social restrictions were lifted, home prices started to climb upward, reaching comparable values by the end of 2022. Yet with a combination of interest rate increases to slow down inflation and unreachable price points, demand again has dropped, confirming the market will only take so much before it draws a line in the sand. So, what does that mean for the rest of 2023?
The 2023 Dip is not a Recession
By the opening of Spring this year, prices were going downward again, and the trend is still continuing. Traditionally, in my experience, the summer brings out the buyers and represents the height of the market in terms of the most expensive pricing, having worked up from active selling earlier. However, this 2023 Spring needs to follow that tune. Instead, the dip opens up opportunities for buyers who thought they might have been priced out of the market entirely.
As mentioned earlier, the housing market doesn’t get to operate in isolation. As one of the primary forms of economic activity in the U.S., it is also highly connected to interest rates and any efforts made to curb inflation. For example, as the cost of debt and borrowing go up, a cold towel gets dropped on homebuying, slowing down purchases financed with mortgages.
Of course, I know that the fast rise in home prices combined with a lackluster replacement from construction adding new units doesn’t help matters either. As the remaining supply also ratcheted upward due to less and less inventory to choose from, that too ended up depressing buying activity despite hot demand for what was available. Eventually, the party ended, and prices collapsed, with sellers desperately looking for new buyers to avoid holding stagnant inventory.
Mixed Signals for Movement Now
Based on what’s happened over the last ten years, one strategy for those looking to sell is to sit tight simply. The 2023 dip will likely change quickly; this is at least crystal clear with how fast the current market has rocketed up and dipped quickly. In that regard, the market watch is obviously a necessity to catch the changes when they do happen versus reading about them late in the newspaper.
Alternatively, for home buyers, the current 2023 dip is a blessing. Many were again clamoring for relief, younger, first-time buyers, feeling blocked and priced out of the market entirely. Price drops are their entry point into the real estate market, with a reasonable price point that can be afforded.
The risk of highly-leveraged, debt-financed homes is preserved on current buyers. Remember, it was only 14 years ago when the 2009 Recession shattered the real estate bubble—those who were teens are now homebuyers coming into the market today. The level of price inflation is preserved on them. In the meantime, the momentary blip is a marginal and temporary door for those who were just priced out and can now get into a home.
Thinking Smart About 2023
Home prices are still, comparably, selling at a premium, but appreciation in a decade can make up for that cost upfront. For sellers, “momentary” is the word to remember. The big thing to remember is that if one sells, he or she had better have a plan for where to land after the sale. Otherwise, all those profits will get eaten up in turn by having to pay for a new home.
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