Above Left to Right: RISMedia CEO John Featherston and Bright MLS Chief Economist Lisa Sturtevant
Real estate agents need to be their own local economists in order to educate clients on precisely what’s happening in the area(s) where they are interested in buying or selling a house.
That was one of the noteworthy points made by Bright MLS Chief Economist Dr. Lisa Sturtevant, keynote speaker at RISMedia’s Real Estate’s Rocking in the New Year virtual conference, held Jan. 5.
In a session titled “The State of Real Estate: Where the Economy Is Headed and What It Means for Your Business,” Sturtevant detailed how she anticipates the 2023 market playing out before answering questions posed by RISMedia Founder, President and CEO John Featherston.
Over 10,000 industry professionals registered for the third-annual event, which featured 60-plus experts discussing a wide variety of topics geared toward helping agents and broker/owners in the challenging year ahead.
Sturtevant cautioned that with an uncertain economy, unsteady mortgage rates, high inflation and the labor market potentially in flux, no one can know for sure how the housing market will respond, but stressed that there will be opportunities to buy and sell regardless.
“Everybody’s looking ahead to what the 2023 market will look like,” she said. “It’s been a couple of crazy years. If anybody says they can tell you where the market is headed, I would take it with a grain of salt. But there are a few things I’ve been watching that I think will be helpful.
“2022 was a tale of two markets. A very fast-paced spring, and summer was still pretty busy. Then, as mortgage rates rose quickly, the market did an about-face. One thing that’s really important to keep in mind as we look ahead is that many sales were pushed forward in 2021 and 2022. Those are sales we might have seen in 2023, but frankly, they’ve already happened.”
Local data brings the most value
A monthly columnist for RISMedia’s Real Estate magazine, Sturtevant has been involved in research and analysis on local economic, demographic, and housing market conditions and local housing solutions for more than 15 years. While following national trends and statistics closely, she emphasized that agents and broker/owners should zero in on their own areas to be of most value to clients.
“This is an opportunity to be a resource for buyers and sellers,” she noted. “To reeducate and reset expectations, and really dispel myths. You’re going to have a lot of buyers and sellers thinking the sky is falling because the last time they saw a market slowdown, the housing market did collapse, and they’re worried that could happen now. Or you’re working with people who’ve only seen the market over the last two years, and think that’s normal.
“But there are many ways in which this market is different from where we were in 2008. We have a much sounder mortgage market, we have much firmer demand, we have very low inventory, and foreclosures are not a problem. Today’s market will provide stable fortunes going forward.
“At the same time, though, we shouldn’t expect the conditions from the last two years to continue into 2023. That level of frenzied pace wasn’t sustainable. So resetting expectations in what might be a more typical market is how brokers and team leaders can be of value to their buyers and sellers.”
Featherston, with more than 40 years of experience in the real estate industry, asked Sturtevant both general and specific questions during the first of 20-plus sessions throughout the day-long event.
For REALTORS®, how valuable, he inquired, is accessing local data through MLS relationships, and dispensing it to their neighbors and prospective buyers and sellers in 2023?
“Every broker, every agent and every team leader should be the economist for their local market,” Sturtevant replied. “They should gather information from local MLSs and from local associations to be able to talk with buyers and sellers about what’s going on at the neighborhood level, at the local level.
“We’re getting a lot of headlines about the housing market, where it might be headed, and it’s almost always like it’s one national housing market. We know that’s not true. As the markets change, local market variation is a much bigger issue than it has been over the last couple of years. So take advantage of local stats. They provide a better picture of what’s going on where you are.”
Where the opportunities exist
Next, Featherston touched on turning negatives to positives for agents, brokers, buyers and sellers.
“Here we are slipping beneath 5 million existing home sales yearly, and mainstream media reports that in a negative fashion,” he explained. “What are the opportunities for first-time buyers and/or those looking to move up? Is it a good time to buy real estate?”
“The numbers sound like a bad story, but again, many transactions were pushed ahead in 2021 and 2022,” Sturtevant said. “There is a significant amount of pent-up demand of buyers who have been sitting on the sidelines for maybe the last three to five months as mortgage rates were rising, waiting to see what the economy was going to do. There are buyers eager to get in the market in the first two quarters this year. I think they’ll find more inventory, but it’s still going to be tight.
“There are many sellers locked into a very favorable mortgage they’re going to sit with for maybe longer than they expected, and so inventory will be low,” added Sturtevant. “Buyers are going to need to be prepared and have financing lined up. First-time buyers in particular are going to be challenged in many areas with affordability. I don’t see price corrections happening in many markets, so it really is finding the property that works for your financial situation, and relying on real estate professionals in what is a transitioning but still challenging real estate market for first-timers in 2023.”
Navigating the new normal
Featherston next broached the subject of mortgage rates, asking Sturtevant for her take on how they play a major role for buyers.
“There is room for mortgage rates to come down in 2023 even if the Federal Reserve continues its rate hikes,” she began. “But we know that the high rates have taken a bite out of buyers’ purchasing power, and it’s the story of the market slowdown in the second half of the past year. The median house price was up 4% year-over-year, but the typical monthly payment was up 54%. Buyers are shopping the monthly payment, not the home price. And that has been a really big challenge for homebuyers.
“But it hasn’t been as big a detriment to the housing market as we might have expected. We know there are a lot of buyers in the market who are selling a home, are capitalizing on record levels of equity, and are able to roll that equity into another home. The folks who have been left out are first-time buyers, who see affordability as a bigger and bigger challenge.
“I believe mortgage rates have peaked. I think they’ll come down slowly, and that will be good for the market. But not to 3% . Both buyers and sellers are coming to terms with the new normal. Buyers to 6% and sellers resetting their price expectations.”
What data sets to watch
Detailing specific risks and opportunities over the next six months was Featherston’s last ask of Sturtevant.
“I like that question because while I am optimistic about the 2023 market, there are potential risks,” she said. “One is the labor market. So far it’s been stable, but if we start to see businesses cut jobs, and people are less certain about their financial situations, that could be a risk for the housing market. I’d also look at saving and spending, as people are moving through their savings at a faster rate than before. And if inflation continues to be high, that could be another risk.
“The labor market has been relatively resilient. We are now seeing unemployment levels as low as they were before the pandemic. As the Federal Reserve raised rates seven times in 2022, we’ve seen concern about what that might do to the labor market. But so far, so good.
“But there are a lot of opportunities,” concluded Sturtevant. “The next five to seven years are going to be characterized by favorable demographics, with more younger people in the market. First-time buyers are going to need a lot of advice. So this is a great opportunity for real estate professionals to be a resource for those who not only need guidance through the process, but also have a lot of information coming at them from different directions. So be that person. There are buyers out there.”
Stay tuned to RISMedia for more reporting from this year’s Real Estate’s Rocking in the New Year
