After the seemingly constant ups and downs we’ve seen in the real estate market over the past few years and the uncertainty that’s created, the start of this year has a lot of us holding our breath in hopes of more stability. There is good news, however! Despite how unpredictable the market has felt recently, if we add some context to what the numbers are telling us today, we can actually get a pretty good idea of where we are heading in 2023 and beyond. One expert described it like this, “I’m looking at the latest housing data and I see surprising demand indicators, including home price resiliency and supply staying restricted. Who woulda guessed that?”  So let’s take a look!
The Current Atmosphere
The start of the year has already seen some key improvements from the end of 2022. Here’s what you should know:
- Mortgage rates are moving downward. One of the biggest changes that was talked about in 2022 was the rapid rise in mortgage rates. This year however, we have already seen a decline in those rates that started in November and is continuing into this month .
- Demand has not plummeted. Last summer, experts predicted that supply would increase through the end of the year to make up for low supply during the pandemic. Instead, supply continued downward through the end of the year. This limited supply growth has helped to keep demand at moderate levels despite high mortgage rates. 
- Home prices endure outside pressures. Another effect of high mortgage rates that many people expected was a freefall in home prices. Instead, home prices have withstood much of the downward pressure, thanks in part to that demand we just talked about, and reached their lowest point in August. They have continued to balance out since then .
- Foreclosures are still historically low. Despite circulating headlines highlighting the rise in foreclosures since last year, we are actually seeing very low current foreclosure numbers. After the market crash in 2008, foreclosures were over 2.9 million and remained in the millions until 2016. In 2022 they were around 324K, which was an increase from 2021, but still significantly lower than what we’ve seen historically .
The Future of the Housing Market
Now that we’ve covered what’s happening today, let’s take a look at what that says about what’s ahead for the housing market. One of the biggest questions on all of our minds is whether or not we are heading towards another market crash. Thanks to misleading headlines about foreclosures and home prices, a recent survey shows that 67% of Americans think a market crash is imminent in the next 3 years . However, the numbers we are seeing today tell a completely different story. These are the key differences you should know that show us the market is in a very different place than before. Check it out:
- Lenders have cracked down on loans. The qualifications for a home loan are much stricter than they were in 2008, which means those who buy homes can afford to keep up with payments, even in an uncertain market. Banks have also taken precautions since 2008 to help prevent a repeat of the damage we saw then.
- Home prices have not crashed. Leading up to 2008, home values saw a 5 year depreciation before finally recovering . Right now, experts are only expecting to see some depreciation next year and then a return to normal appreciation by 2024.
- Equity saves the day. A key difference between the market in 2008 and the market today is home value over time. In 2008, the amount of tappable equity available to homeowners was less than half of what it is today . This means that even though there may be short term ups and downs in home prices, they are still retaining their value in the long run, which will help support the market in times of volatility.
- The market is fighting for stability. Experts and big banks are already impressed by how the housing market has been reacting to changes in financial markets. Goldman Sachs, for example, has already reversed their predictions for this year. At the end of last year, they predicted home price depreciation to be about 6.1%, but in their most recent update they pulled that depreciation back to only 2.6% . This shows that experts in the market expect homes to retain even more value than they originally thought.
There is no doubt that we have seen some major rises and falls in the market through recent years. The good news however, is the housing market is proving to be even more resilient than we expected, thanks in part to informed buyers and sellers like you. As we push forward through 2023, one thing we can expect to see is continued movement towards a more balanced and successful market.