2022 was still a wild ride when it comes to Phoenix real estate. Coming off of a pandemic-fueled housing market presented its challenges for buyers and sellers alike. Demand was high and interest rates were low, sparking bidding wars between prospective buyers that progressively drove up property prices. But things are drastically different as we end the year with the housing market becoming more balanced. 2023 could prove to be a great year for both buyers and sellers. Although we don’t have a crystal ball, below are some potential market dynamics and real estate trends we could see in the year ahead.
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Residential real estate predictions for the Phoenix area in 2023:
• Interest rates will continue to drop, which will increase buyer demand and create more competition. Prices may fall until mortgage interest rates drop enough to entice buyers back into the market. Until then, buyers will have more bargaining power with sellers than they have had in the last two plus years.
• Buyers will continue to ask for concessions in the first half of the year until competition heats up; at which point concessions will all but dry up.
• Inventory will continue to rise, giving buyers more opportunities.
• Sellers will price according to the market, not shoot way high on their initial listing prices. This is as a result of increased inventory and a drop in supply. .
• Investors will re-enter the market once they sense market stabilization and prices steadily appreciate. The year 2023 will be favorable for income producing investments. As investors find reasonable financing solutions, they will capitalize on increased rental demand and high rental prices.
• You’ll see fewer realtors. This could be a direct consequence of the tumultuous housing market we’ve experienced. The country has more than 1.4 million licensed agents, and 800,000 of them did not sell a single house in 2022. Many licensed agents will decide the expenses associated with their license, professional dues, MLS fees, and brokerage fees do not make financial sense. A 2014 NAR report stated that 87% of agents wash out of the industry within 5 years of starting and a tumultuous market like we have had makes a tough industry even more difficult.
• iBuyers will be few and far between as the business model is proving difficult to justify. The iBuyer model barely worked when home prices were consistently on the rise. Now that prices have fallen and are stabilizing, the model is proving to not be profitable. Recently, iBuyers have substantially reduced their purchases, and experts predict that this trend will last through 2023.
2022 has proven to be one heck of a real estate market to navigate and the anticipated changes in the market for 2023 will prove to be dynamic as well. That’s why working with an experienced, active, full-time realtor who has their finger on the ever-changing pulse of the market will be more important than ever.
Author: Trevor H. Halpern, J.D. is the #1 independent agent at Phoenix-based North&Co. and the CEO of Halpern Residential.