Is the housing recession over in 2023? We have been experiencing a looming real estate recession in this country. Property prices in some areas started falling in some housing markets, especially those which experience a boom during two years of the pandemic. The housing market in 2023 has been a mixed bag.
Home prices have now started rising in most of the markets in the nation, and inventory remains low. This has made it difficult for buyers to find affordable homes. So, is the housing recession over? It's hard to say for sure. Some experts believe that the market is still in a recession, while others believe that it is starting to recover. Ultimately, it will depend on a number of factors, including the economy, mortgage rates, and inventory levels.
Is the Housing Recession Over in 2023? Analyzing NAR's Latest Insights
The real estate market has been a rollercoaster ride in recent years, with uncertainties and challenges that have left many wondering about its future. The National Association of REALTORS® (NAR) has recently unveiled key indicators that shed light on whether the housing recession is truly over and what lies ahead for the housing market.
Signs of Recovery: Contract Signings and Multiple Offers
In a heartening turn of events, contract signings have shown promising growth in the past month. Home buyers are now finding themselves in the midst of multiple offer scenarios, a phenomenon that had been largely absent during the recent downturn. This encouraging trend underscores the potential end of the housing recession, with buyers eagerly competing for the limited available properties.
Rising from the Ashes: The Housing Market's Resurgence
The housing market is displaying undeniable signs of recovery, and the statistics are there to prove it. The median prices of existing homes reached an impressive peak in June, marking the second-highest figures in the past two decades. This surge in prices is a testament to the renewed interest and activity in the market.
Backing up these observations is NAR's Pending Home Sales Index, which experienced a 0.3% increase in June—marking the first upward movement in four months. According to Lawrence Yun, NAR's chief economist, the presence of multiple offers on properties is a clear indicator of the resurgence in housing demand. However, this demand isn't being fully met due to a significant shortage in housing supply.
Inventory Dilemma and the Road Ahead
The scarcity of homes available for sale remains a pressing issue in the current real estate landscape. Housing inventories have plunged by a staggering 13.6% compared to the previous year's already low levels. Yun's recent report highlights the severity of the situation, stating that the market is grappling with an acute shortage of available properties.
This scarcity is translating into intense competition among buyers, leading to higher home prices and mortgage rates. Nevertheless, there's a silver lining on the horizon. Yun anticipates that the recent increase in mortgage rates is likely nearing its end. As consumer price inflation aligns with the goals of the Federal Reserve, mortgage rates are projected to stabilize. This stabilization could pave the way for a surge in homebuyer activity in the coming months.
NAR's Forecast and Future Projections
NAR's housing forecast provides valuable insights into the market's trajectory for the remainder of 2023 and beyond. Here are some key predictions that offer a glimpse into what the future holds:
NAR projects a 12.9% decrease in existing-home sales for 2023 compared to the previous year. However, a brighter horizon is forecasted for 2024, with a significant projected increase of 15.5%.
The forecast for national median existing-home prices indicates relative stability. The expectation for the current year suggests a marginal decline of just 0.4% compared to 2022. However, a rebound is anticipated in 2024, with prices projected to rise by 2.6%, reaching $395,000. Notably, different regions of the U.S. are expected to experience varying price trends.
New-Home Sales and Housing Construction
In the realm of new-home sales, NAR predicts a positive trajectory. The sales of newly constructed homes are anticipated to rise by 12.3% in 2023 and an additional 13.9% in 2024. This surge in sales can be attributed to a growing demand for greater inventory options.
On the flip side, housing construction faces challenges. Despite calls to address supply deficits, NAR's forecast indicates a 5.2% decline in housing starts for 2023 compared to the previous year. However, the situation is expected to improve in 2024, with a projected increase of 5.4% in housing starts.
Regional Insights and the Larger Picture
While the housing market's overall performance in June showed a 15.6% decrease in pending home sales compared to the previous year, a closer look reveals regional variations. Contract signings increased month over month in the Northeast and Midwest but experienced a decline in the South and West. Nevertheless, all major regions of the U.S. registered year-over-year decreases in transactions.
Conclusion: A Promising Outlook for the Housing Market
In conclusion, the question on everyone's mind—whether the housing recession is over in 2023—seems to be met with positive signs. The combination of increased contract signings, multiple offer situations, and stabilizing mortgage rates suggests that the worst might be behind us. NAR's insightful forecasts paint a picture of a housing market in recovery, paving the way for potential growth in the coming months and years.
As buyers, sellers, and investors navigate this evolving landscape, it's crucial to stay informed about the trends and shifts in the real estate market. The data and predictions presented by NAR offer valuable guidance for individuals looking to make informed decisions in the housing market.
What Does Real Estate Housing Recession Mean for You? [For Buyers]
There are several ways to make a real estate recession work in the favor of homebuyers:
- Look for properties that are priced below market value due to the recession.
- Look for motivated sellers who may be more willing to negotiate during a recession.
- Invest in rental properties that can generate cash flow during the recession.
- Look for properties in areas that are not as affected by the recession.
- Consider flipping properties, as a recession can create opportunities for buying low and selling high.
Opportunity! With housing prices dropping and interest rates still near historical lows, this is the perfect time to find good real estate deals and buy cheap.
Your goal should be to find investment opportunities in markets that offer the greatest long-term growth and stability. These are markets that show growth in employment and population.
Target properties that you intend to hold for a short or long period of time. You will gain equity through appreciation as the markets correct and grow over time.
Be sure to only invest in properties that provide a positive cash flow in order to cover all of your operating expenses. This is very important in order to be able to hold the property long enough to benefit from the appreciation that comes over time with real estate.
On the flip side, this is not the perfect time to sell. If you own real estate, it probably makes the most sense to hold onto your investment until the market rebounds. As always, it will. In the meantime, take advantage of the market by either refinancing your own properties for better terms or buying more property that you can rent with a positive cash flow.
During a real estate recession, property values and sales may decline. However, there are ways to potentially make the most out of a recession. One strategy is to look for discounted properties that can be bought at a lower price and potentially sold for a profit later on. Another strategy is to invest in rental properties, as rental demand may remain steady or even increase during a recession.
Additionally, it is a good time to negotiate a better price with a seller as they may be more willing to accept a lower offer during a recession. It is also important to do your due diligence and thoroughly research any potential investments before making a decision.