Mid-Year Housing Market Report

Stick around long enough in the real estate world and you’ll find out quickly that the landscape is always on the move— pun absolutely intended. So, although our experts put together a comprehensive 2023 market trends post and a blog post about 2023 predictions, it’s always a best practice to take another look at the real estate market to let everyone know how things are going and how they can pivot their buying or selling strategies.

January 2023 to July 2023

The first half of the year contained a volley of interest rate hikes that either caused homebuyers to rush before rates got higher or to sit on their house and wait on selling. First-time buyers felt the pressure to find a home before the Federal Reserve raised rates even higher to get their foot in the door as a homeowner.

The inventory of new listings, which was already low after the frenzy of pandemic demand, stagnated even more after each interest rate increase. Although there were many interested buyers of single-family homes, the expected price declines didn’t happen in tandem with higher interest rates.

Mid-Year Market Report & Trends at a Glance

So here we are at the mid-year mark, taking a glance at our current situation. To help with this blog post, our President, Will Dickson, and our CRO, Andy Satkowiak, contributed what they have seen over the past few months — and what we can potentially expect in the second half of the year.

Trend #1: About That “Crash”…

“It’s becoming a more popular thought that the residential real estate housing market just simply won’t crash and may not even dip significantly anytime soon.” – Andy Satkowiak, CRO.

That’s not-so-great news for the many would-be buyers looking for an affordable new home. Millennial and Gen Z buyers remember the crash of 2009 and its aftermath of plentiful, cheap homes, hoping it will return once more. Unfortunately, the dip in home sale prices that everyone so desperately wants may not happen for the foreseeable future.

Instead, we can expect to see a slight decrease in interest rates that extends into next year. However, as with all predictions, this could very well change if market trends go in a different direction in the coming months.

housing market crash cartoon house with question mark and downward trend arrow

Trend #2: The Disruption Continues.

“The real estate sector is currently facing a period of transformation and disruption. Many companies are experiencing significant struggles, with funding drying up and valuations plummeting.

“This has led to widespread layoffs and a more cautious approach to new investments. Nonetheless, some owners are still buying properties, albeit at a slower pace, and putting together deals has become more challenging. People expect this to start turning in Q3, but it won’t be like 2021,” says Will Dickson, President of Marketplace Homes.

Trend #3: Sales Are Still Slowing Down… But Prices Aren’t Dropping That Much.

“As the Fed raised rates multiple times this year, it has slowed down the number of transactions significantly and reduced affordability of buying homes, but it hasn’t pushed demand so far below supply that house prices have needed to drop in most places. In fact, there’s a feeling that once the rates do come down, even slightly, it will pick transactions up to a historically normal level.

“The big question is when. When will rates drop, and when they do, by how much? Inflation has largely been curbed but is still above target levels and the Fed has refused to make any big changes.” – Andy.

Trend #4: Interest Rates Remain Stubbornly Too High to Stimulate Mass Buyer Activity.

Current interest rates remain elevated at around 7%, which is nearly double the rates of this time last year. According to expert predictions, we can see interest rates fall to around 6% by the end of the year. Though this figure is an improvement, it’s still elevated compared to year-over-year rates. Overall, this figure isn’t low enough to make current home prices affordable for more Americans. What’s the magic number to stimulate more buyer demand and generate more existing home sales? Many experts agree with the following statement.

“5% would open the floodgates.”- Andy.

Trend #5: Homeowners Who Bought Homes with Lower Interest Rates Feel “Locked In.”

There is no surprise that in this mid-year update, we’re sharing that many people who bought homes before the series of interest rate hikes aren’t selling. The lower mortgage rates of the recent past are keeping people firmly in one spot to not increase their cost of living, while high mortgage rates make it difficult to make a lateral move to a new home.

Whether this is for the short-term or long haul depends on how much interest rates will relax by the end of this year and in 2024. Whether the Fed relaxes or adds more basis points will greatly affect housing inventory, the median sales price, and if this slowdown will persist.

Trend #6: Build-For Rent (BFR) and Single-Family Rentals (SFR) Are Doing Well.

“SFR continues to be a bright spot within the real estate industry. Multifamily cap rates have become too compressed and commercial is very difficult with work from home. Despite higher interest rates slowing appreciation, the significant undersupply of residential properties offers a lot of support to this segment. This market dynamic indicates that SFR will continue to thrive in the foreseeable future.

“I am particularly excited about our prospects as we stand at the intersection of the most desirable asset within real estate (SFR) and the increasing focus on operational efficiency. Our expertise in these areas positions us exceptionally well to navigate the challenges and seize the opportunities that lie ahead” – Will Dickson, President.

With rentals being so popular, the demand for build-for-rent homes is increasing. These homes, built expressly for renting to tenants, are providing much-needed new housing for renters who are waiting to buy a home or find themselves in an area where not many resale homes are available. The new construction element makes these homes more desirable since they are modern, in good condition, and usually belong to communities with amenities (like pickleball!)

Trend #7: New Construction Home Builders Are Helping

When people aren’t selling their homes due to higher mortgage rates, but residential housing demand persists, the only solution left is to build more homes. Builders have been closing the gap to meet this need. This is good news for Marketplace Homes, which specializes in new construction and investment management.

“Our team continues to navigate these challenging waters with confidence, staying committed to our strategic objectives. We’ve seen tremendous growth already this year and our pipeline of new business is very strong,” -Will Dickson.

Mid-Year Market Update: Stay on Top of What’s Happening

If you have plans to buy or sell real estate in the future, it helps to get connected with a real estate expert and lender sooner rather than later. Even if you are waiting for conditions to fall in your favor, knowing what steps to take to prepare financially or logistically can greatly help you navigate your next steps. For more information, contact Marketplace Homes today.