Looking at the Year Ahead
2022 was an odd year. We had an amazing first quarter and did almost a full year’s sales in one quarter. Then, everything fizzled. We all saw this coming. It should have happened a long time ago. Incredibly low interest rates and “easy money” during COVID drove our market to highs that nobody imagined. There had to be an end to the 40% growth in two years, we just didn’t know how abrupt of a stop it would be. But when you consider the increase in rates over a very short period, something had to give. The main difference between this economic downturn and the previous two downturns is people are in much better financial shape this go-around. We don’t have the sub-prime distress and people have gained so much equity over the past two years that even if they give back a small percentage, they are still “in the black”.
So, what does that mean for the housing market? Until something “gives”, we will have lower than normal volume. We should see some price declines, but not the major “freefall” that we have seen in the last two downturns. Sellers do not have to sell, so they are either taking or keeping their homes off the market. Sellers that must buy something else don’t want to replace a loan with a 2.75% payment with a 6% payment. Buyers don’t seem to be too motivated either. With the large increase in rates, buying power has been greatly diminished and we are seeing a lot of buyers sitting on the sidelines. Hopefully the experts are right (They haven’t been the last few years, but we will put that by the wayside!) Most economists and large corporations see this as a shallow recession and feel that by the end of the year rates should soften and activity will increase. We may some minor price declines, but until there is distress, values will hold fairly strong. We are already seeing a slight decline in rates and hopefully that will generate more activity. Let’s see what happens this year. It should be an interesting ride!
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