2023 Housing FORECAST
Happy New Year! Now what does that mean for Orange County Real Estate?
🏡Active Inventory – begins with less than 2,500 homes, the second lowest start to a year since tracking began in 2004. Prior to COVID, the average start was 4,420, with 77% more available homes to purchase. The inventory crisis will continue. Expect the inventory to rise on the back of diminished demand, only to be hampered by the “Hunkering Down” effect where homeowners opt to stay in their homes due to their underlying low mortgage rates. More homes will enter the fray once mortgage rates drop below 5.5%, most likely sometime in mid-2023.
🏡Demand – mainly due to the persistent high mortgage rate environment, buyer demand will continue to be muted. With less competition and pressure on affordability, buyers will be extremely cautious and unwilling to stretch above the asking price. They will be looking very carefully at price; so, expect home values to drop between 6.5 to 8.5% for the year. There is a strong potential for mortgage rates to dip below 5.5% by the summer due to the combination of a slowing economy and falling inflation. With lower rates, demand will strengthen along with affordability. The combination of lower rates and lower home prices will prompt this rise in pending sales activity.
🏡Luxury Market – The Spring Market will be the strongest for luxury and will become a bit more sluggish and susceptible to Wall Street volatility during the second half of the year. Luxury housing will be sluggish and will continue to transition to normal, longer market times, often taking months to procure a sale.
🏡Distressed Inventory – do not expect a wave of foreclosures. The number of active forbearances has dwindled to very low levels. Of the over 7.8 million forbearance exits, 91% are either performing monthly or paid off their loans. Only 1% are in active foreclosure, less than 100,000 across the United States, and the current delinquency rate is at its lowest level in decades. Expect slightly more distressed sales in 2023 as there are some homeowners who will be susceptible to an economic downturn. Nonetheless, the total numbers will be very low and undetectable in the broader housing market.
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