As the year draws to a close I figured it's time for a year end prediction… why not?
Before I begin, let me remind you that all real estate is local therefore this prediction is based on my particular niche along the Ventura/LA County line, though it's probably safe to say this will probably hold true for a lot of So Cal. So here goes…
Prices are not going to fall as much as many predicted. I am rather surprised by this but it's apparent that inventory is going to remain very tight in 2023. As long as we remain at these hyper low levels of available homes, prices will have a floor of support. (Find out your home's value here) I'm telling my buyers to be patient, that more homes will enter the market, but I am concerned for them that even when they do, it's going to be competitive. (Find your dream home) Greater competition for fewer goods means higher prices. And while I am not saying prices won't drop from today's levels, because I do think there's more to the downside, I am beginning to doubt they will drop as much as I was thinking they would just a couple months ago.
Sales will be anemic. The problem when there's low inventory, is that there's fewer sales. Unfortunately for many Realtors, lenders, escrow officers, title reps, home warranty, inspectors and appraisers, fewer sales mean fewer dollars to go around. This is when the 80/20 or even 90/10 rule rears its head. The best will thrive while the rest scramble for the leftovers. (Read Tim's testimonials here) Unfortunately, this also means many people will be forced to leave the various real estate related industries for other careers. In the near term this wash out is good for those who survive, but when a normal market returns, this will come back to bite with poor and slow service as a result of personnel shortages.
Unemployment will rise. As I just mentioned, certain industries are going to bear the brunt of any 2023 recession. In fact, I predict the unemployment figures will be very white collar and not people in the service and hospitality fields. And because so many people are flush with savings following the pandemic, the ability to maintain a mortgage will stay strong. While it is true that higher income loss usually means higher debt service obligation, large home equity positions will allow those in duress, to sell . (Contact Tim Here) or even alternatively rent rather than go into foreclosure. Unemployment usually means a rise in distressed sales, but with rents so high; a chronic housing shortage and locked in ridiculously low interest rates (71% of all mortgages are at 4% or less), we should not anticipate a wave of foreclosures.
Cash is still king. Cash buyers and investors, including the big boys like Blackstone, are chomping at the bit for a break in prices. As the inventory remains low and price declines slow, cash buyers will jump back in. Unlike 2008-2012, this correction in values should not be viewed as a falling knife, rather a normal correction. As such, the fear factor will be mitigated.
The Federal Reserve will stop raising rates by spring. For many Fed watchers myself included, it is patently obvious that the Fed has already overshot and any further rate increases going forward are going to exacerbate the recession. This will become clear I predict by March and the Fed will sit back and watch the impacts of the dramatic rate hikes of 2022.
So, there you have it. Feel free to comment if you think I'm right or wrong and why.
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