Since we are officially in the holiday season, which is typically a slow season in Real Estate, it is time to provide an update on where the market sits and where it is going in 2023. Every couple of weeks I check in with people who have discussed buying and/or selling with me in the not too distant future and update them on where the overall market stands and where I think it is going. Since the summer began most of the news has been somewhat gloomy; increasing interest rates have had their intended effect and slowed the real estate market down. Recently, some good news has occurred; mortgage rates dropped by almost half a percent, and the CPI inflation numbers have come down significantly since the summer. What does this mean for those looking to buy or sell in 2023?
A few things to consider when discussing buying in 2023 is that we have returned to a more balanced market. Gone are the days of "auction reserve" style list pricing, where the list price is merely a starting point for bidding. Sellers who want or need to sell will have to continue to be more realistic about their list price to attract potential buyers. This is not to say that we are in or entering a true "buyers' market," just that we are shifting from one of the biggest sellers' markets of all time to a more balanced market. Right now, Bend is sitting at around 2.5-3.0 months' worth of inventory, which, while up significantly from the last few years where we were hovering around 0.5 months of supply, is still low in terms of supply. A typical buyers' market is created when a market has over 6 months of supply, so I would characterize the market right now as balanced due to the decreased demand (influenced by higher interest rates), but limited supply based on the overall number of homes for sale in the market right now.
For those who are considering selling in 2023, it is not all bad news, as you might expect. With the higher rates we have seen over the last 6 months prices have decreased, but they are not free- falling, and there doesn't seem to be a "bubble" about to burst. Prices have begun to stabilize as rates appear to be less volatile, but the main factor working in sellers' favor is lack of inventory. As we mentioned before, inventory is still low, largely due to so many people purchasing homes (7.4 million in 2020, and 6.9 million in 2021) along with ~ 12.5 million households refinancing their homes over the same period. For these people selling their homes, it would mean giving up a historically low interest rate and replacing it with a much higher one, so they will be far less inclined to put their home on the market. This will be a major factor over the course of 2023 and likely the next few years, as supply will remain low. New construction had been slowed by supply chain issues, but is now facing decreased demand and increased holding costs, which has worked to decrease construction activity, locally and nationally.
My expectation for 2023 is that we'll experience a return to normalcy in the housing market. This means that homes will be on the market for a few months at a time, buyers will be able to ask for concessions to be made by the sellers, and prices are negotiable again. I certainly don't have a crystal ball, so no guarantees, but that is what I am expecting of the housing market in 2023.