The Best Opportunity For Buyers Is NOW
The past year belonged to the sellers. They were positioned squarely in the driver’s seat, thanks primarily to limited inventory and rising home values. Of course, the rising month-over-month interest rates didn’t help matters. But as we tread expectantly, albeit gingerly, into 2023, things seem to be changing for buyers—for the better.
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“This may be the one and only window for the next few years to get into a buyer’s market. As the Federal Reserve data shows…home prices only go up and always recover from recessions, no matter how mild or severe. Long-term homeowners should view this market…right now…as a unique buying opportunity.”
~ David Stevens, Former Assistant Secretary of Housing
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What’s the Market Telling Us?
The real estate market has been quite chatty since December, and the message it is conveying is that inventory is creeping up for spring, and rates seem to have plateaued around 6.5% (and even flirted with 6.0% earlier this week). As for the potentiality of a dreaded flooded market, fret not, there are roughly 35% fewer homes on the market today than at the start of the pandemic. Even if available inventory moves closer to pre-pandemic levels, I still foresee a fairly tight market, especially in the Greater Los Angeles area.
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Freddie Mac 30-Year Fixed Rate: January – December 2022
Source: Freddie Mac
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What Are Home Values Going To Do in 2023?
As home values came back down to earth—after the meteoric rise in early 2022—a lot of prospective home buyers (and sellers) are anxiously waiting for it to settle. According to most relevant indicators, a free fall with home values is not a possibility, certainly nothing even remotely close to the crash of 2008. In fact, if you look at the graph below, the threat of further national home value depreciation may be over, having dipped to its lowest level in August. There is strong evidence to suggest that home values have indeed hit bottom and are now poised, if anything, to inch back up. Whatever the case, there is absolutely no indication of a free fall.
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2022 MOM % Change in Home Values
Sources: Case Shiller, FHFA, Black Knight, CoreLogic
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Opportunity Abounds In Greater Los Angeles
All key indicators suggest that buyers could be entering an ideal period right now. Inventory is sure to increase during the spring, and home values should stay relatively constant for the next few months, regardless of what interest rates do. And the indication is that rates should remain safely in the 6% range, giving buyers more confidence to act. Of course, if the rates were to continue to drop over the next year, refinancing is always an option. Either way, buyers should have more opportunities than they have in the past 12 months.
Be well,
Charles