Housing Prices Expected to Drop in 2023
According to Zillow economist Jeff Tucker, prices are predicted to drop across the US over the next 12 months. The economists surveyed are predicting that prices are going to drop anywhere between 5% to 10% nationally. Jeff Tucker is predicting that this time around is going to be totally different than 2008 because there's not going to be the same level of motivated sellers that we had during that financial crash. These same economists that are predicting a 5% to 10% drop in 2023 are predicting national price appreciation to begin again in 2024.
The saying in real estate is, “it’s all about location, location, location” and the same is true for these price drops that they're predicting. They're predicting much higher price drops across the Western US, California, and many of those states but a much lower drop here in the southeast. Huntsville is typically more insulated than the rest of the country, even the southeast. With that 5% drop nationally lower in the southeast, probably even lower in Huntsville, I'm predicting that Huntsville home prices are likely to stay flat in 2023 and begin appreciation again in 2024. The housing market needed to normalize so all this is really a good thing.
Challenges Created by Lack of Housing Supply
The challenge that I see is with the next building cycle. You look at the building rates for homebuilders over the last several years and what you'll see from this chart is that they just started to get back to normal after 2008. Between that 2008 period and today, there's been about a 5.5 million home deficit. The challenge that we're seeing now with higher interest rates is that builders' optimism is starting to tank and they're actually starting to slow down that growth rate of building homes.
Not only are they actually building fewer homes but some of the homes that they are building are in a new category called ‘Building for Rent’. That means there are going to be fewer homes for sale and there's probably going to be an even bigger gap during this next cycle due to lack of inventory. We'll likely go from a 5.5 million home deficit to above a 6 million home deficit. The challenge that's going to be created is, as interest rates start to lower again, we are likely to see the same bidding cycle and home appreciation again.
There's less competition in the market right now, so now's the opportunity to go out and find your dream home and take advantage of the market where negotiations are more prevalent than they were just a year ago. There are also a lot of new construction opportunities with this temporary glut in supply that they're facing so a lot of builders are getting aggressive with their pricing and getting aggressive with their incentives, take advantage of that.
Marry the home, date the rate. If you're renting, renting is a much higher interest rate than the rate that we're paying, even at 7%, even 8% interest because renting is 100% interest. Put your money to work for building your future by marrying the home and dating the right. Buy the home you want, then look to refinance over the next couple of years.
Posted by Matt Curtis on