The 2023 real estate market is expected to be a buyers’ market. According to a new report from StreetEasy, homes that went into contract in February were at the highest level since the COVID-19 pandemic.
But with hybrid work schedules becoming the norm and commuting not as important, Yun expects the market to remain balanced.
1. Rising Interest Rates
When mortgage interest rates increase, it becomes more difficult to buy a home. This can lead to fewer real estate transactions and a slowdown in the housing market. However, there are ways that property investors can mitigate the effects of rising interest rates in the real estate market.
One way is by offering discounts to potential buyers. Another way is to offer seller financing. This can attract a more diversified group of buyers and help to boost the real estate market.
However, despite the recent rise in mortgage rates, many experts believe that the housing market is not headed for a crash. In fact, many think that mortgage rates will begin to fall soon. While this will make buying a home more expensive, it will also reduce mortgage insurance costs and other fees. Thus, it will still be a good time to invest in real estate. But only if you know how to deal with these rising rates.
2. Low Inventory
One of the biggest issues that can impact property investors is low inventory. When there is a shortage of homes on the market, it can make it difficult to find a home that fits your budget and needs. This is especially true in places where there are a lot of buyers competing for limited inventory.
This low inventory is due to a combination of factors. First, many homeowners who wanted to sell their homes during the pandemic stayed put instead, either because they felt safe in their current home or they were unable to buy a new one at the prices that are currently available.
Additionally, mortgage rates have risen significantly since their pandemic lows, making it less attractive for homeowners to sell their homes and move somewhere else. And finally, there are a number of properties that have been bought by investors and turned into rental houses. This can also lead to a low inventory of homes on the market.
3. Uncertainty About COVID-19
As the real estate industry tries to respond to the new challenges of the COVID-19 crisis, many players are also considering longer-term effects. This is why sustainability will play a big role in the future of the sector.
In the short term, the lockdown experience is revealing untested physical fragilities in many properties: hospitals are showing their limited capacity for patients, residential units that were once used intensively are now extreme energy consumers and malls, which were built as spaces of aggregation and proximity, will lose their value due to social distancing measures.
This will create significant demand for properties that offer a safe and efficient living and working environment. The smartest real estate players will make decisions that protect the safety and health of their employees, tenants, and end users, and lay a foundation for sustainable futures. They will use the current opportunity to centralize cash management, change their decision-making processes and digitize their businesses.
4. Changes in Buyer Behavior
Buyer behavior can have a significant impact on real estate market trends. For example, if buyers feel confident about their financial situation, they may be more likely to invest in property. This can boost demand and increase prices. However, if buyers feel less optimistic about their financial situation, they may be less likely to purchase property and could even delay buying decisions.
Other factors that can influence buyer behavior include the state of the economy and local economic conditions. For example, if unemployment rates are high, this can reduce consumer confidence and slow demand for property. Conversely, if employment rates are rising, this can lead to higher consumer confidence and increased demand for property.
In addition, local legislation and tax incentives can also affect buyer behavior. For example, if there are tax credits, deductions, or subsidies for purchasing property, this can help boost demand and push up prices. This trend is particularly noticeable in “magnet” markets in warmer climates, which often see the highest growth in home prices and sales during a recovery.