“Home sales will be down somewhere around 8% – 12% for 2023 when compared to 2022, and the year will be 1982 all over again.”
That firm, disquieting forecast is the key one made by Lamacchia Realty Broker/Owner Anthony Lamacchia, in his annual Real Estate Market Predictions report, released December 29. But he also cautions that there’s no reason for agents and brokers to think they can’t still excel.
For those too young to recall the market specifics of 1982, Lamacchia explains.
“I’m clearly expecting an early 1980’s scenario, when inflation ran up, causing interest rates, including mortgage rates, to spike,” he says. “It’s amazing how history repeats itself, but with nuanced differences.
“People continue to compare what’s going on to 2008, but that’s not the case. At that time we had an extreme overabundance of sellers and not enough motivated buyers. Right now, there’s undoubtedly not as many buyers as there were over the past few years. But there’s also a lack of sellers because people are reluctant to give up their low mortgage interest rates.”
The firm operates in New England and South Florida, but Lamacchia notes that his predictions and observations apply nationally on many levels.
“Though real estate markets can vary from one local market to another, the majority of the overarching market trends are happening everywhere on a grander scale right now,” he says. “Much of this will likely be applicable to your market unless you are in a unique place with outlying factors.”
Lamacchia told RISMedia that one of the main factors he based his gloomy 2023 predictions on had to do with what’s happening in Ukraine.
“The war drove up fuel prices,” he noted. “Yes, they’ve come down, but they’re higher than they need to be. So as long as that’s happening, it’s going to continue to keep upward pressure on inflation, which keeps upward pressure on interest rates.”
Interest rates bring mortgage rates up or down with them, and 2022 was a tale of two halves, with the first months of the year seeing rates around 3%, spurring home sales at a frenzied pace. During the second half of the year, as Lamacchia points out, the rates skyrocketed to over 7%, pushing many potential buyers out of their comfort zones. It also chilled inventory levels.
“Owners locked into rates between 2% – 4% don’t want to walk away from them, and won’t unless they have to,” he says. “Therefore, most would-be sellers are in a holding pattern. I believe we will see this continue over the next 18 months. Of course with life changes, such as growing families, empty nesters, sickness, divorce, retirement and relocations for careers, as well as first-time homebuyers, of which there is a constant new supply, the need for real estate transactions will never stop.
“Therefore, real estate, despite tricky market adjustments like this, never comes to a complete halt, but it has slowed down. Nationally, I expect under 4 million home sales. We haven’t seen home sales that low since 2011, and we may even beat that and go lower.”
Home prices seen rising slowly
Lamacchia opines that at some point in early- to mid-2023 he sees home prices begin to even out when compared year-over-year, followed by a slight decline.
“A year from now when we measure 2023 as a whole, I believe that prices will land somewhere between 3% down or 3% up, and that 6% swing, for all intents and purposes, is essentially flat and should be welcomed,” he says. “A slide toward equilibrium is exactly what is necessary. Truthfully, prices going down more than that would be healthier for the market because affordability has just gotten too far out of reach for buyers.”
Breaking it down by quarters for 2023, Lamacchia believes that from about January to April, multiple offers will make a comeback and many buyers will wish they bought this past fall. He then feels that things will begin to even out between buyers and sellers from April to July. Home sales will be down during this period compared to the same period in 2022.
“From July to September, more homes will get listed, and those sellers will be mad that they cannot sell for what they saw their neighbors sell for who listed in the winter and early spring,” he asserts. “Fall will bring about a deceleration like this past fall and sales will be flat compared to 2022 to finish out the year.”
Regarding mortgage rates for 2023, Lamacchia isn’t part of the chorus preaching a decline.
“There is a lot of optimism circling around about how quickly rates will start to decline to a more desirable level, and in the last six or seven weeks, they have settled down a bit into the mid-low 6s, which has been good news,” he says. “Many mortgage experts disagree with me and strongly feel that rates will continue their decline due to inflation seeming to be backing off. I am not convinced that inflation is as good as recent reporting indicates.
“I predict in about a year from now, rates will be lower than they are now, but getting there may be a bit painful. Buyers need to keep that in mind along with the fact that there are creative mortgage options.”
Always optimistic, Lamacchia was steadfast in his belief that the industry was sound when asked what he tells his agents as they prepare for 2023.
“There are still plenty of homes to sell. That’s my answer,” he says firmly. “I mean really…pick a place like Massachusetts. There’s still 75,000 homes to sell. So if we’re good, we’re gonna get a lot of them. Renters, would-be sellers and buyers are all going to eventually get impatient and tired of waiting, and they’re going to go out there and get the house they need. The show can’t and won’t stop. The real estate show always goes on.”
