What to Expect in 2023 – Greater Sacramento area
Nobody has a crystal ball, but everybody wants to know what the real estate market will do in 2023. This is my 22nd year being an active full-time realtor so why not throw my opinion out! LOL
The Market Is Always Changing
As the wise saying goes; “Change is the only constant in life”, well this holds true for real estate as well. The past 6 months were a little more dramatic when mortgage interest rates went from 3.5% to 6.5%. Buyers paused and homes sales slowed down dramatically by 30-40%. However, please keep in mind that prior to this slow down the market was overheated with little to no inventory and buyers bidding up prices. There in turn, making the last 6 months of 2022 appear more dramatic.
Back to Normal
I project that 2023 will be more like a “normal” market and certainly not a crash like the mainstream media makes it sound. In a “normal” market both buyers and sellers have room to negotiate without anyone gaining an upper hand. Historically speaking over the past 40 years 6.5% interest rate is average. Since the pandemic in 2020 we have had nothing close to normal. Hyper low interest rates with thousands of people moving to our more “affordable” area.
Sellers Need to be Realistic
We all heard the stories of 10 to 20 offers on a home and selling at thousands over asking price. Those days are gone. Yes, multiple offers still occur for well-priced homes that have been updated or move-in ready. Pricing your home is going to be key to getting the best offer on your property in the shortest period. Sellers should consider offering buyer concessions such as a credit for closing costs or interest rate buy down especially for first-time home buyers. Sellers should also plan to do cosmetic repairs and freshen their home up with fresh paint etc. before putting their home on the market.
Buyer Will Have More Control
Yes, you will have higher interest rates, but the focus should be on your monthly payment. Although the market has slowed down, we still have low inventory on the market. Less than 3-month supply of homes for sale is considered low. In a normal market 3–4-month supply is typical. Buyers will have time to view multiple properties and in some cases negotiate for certain concessions. There are more items to negotiate than just price. We are not in a market where you can “low-ball” and expect the seller to accept any price. It’s very unlikely that we will see a crash like the one in 2008. The primary reason is that sellers have realized a large equity increase in their homes during the past 5+ years. Short sales and foreclosures can be found but they only represent 2% of the market. Again, that’s normal.
Things to watch in 2023
- Interest Rates – As the Fed’s continue to talk about increasing interest rates to fight inflation. Recently there are signs that inflation has slowed. This could keep rates under 7%.
- Inventory - the chart below shows the number of months of inventory for the past year. As you can see, we continue to stay under 3-month supply. The fewer homes on the market the less likely sellers are dropping their prices.
- Average Sales Price per sq.ft. – This is not an exact measurement from home to home but worth watching on a macro level. The chart below shows the average price per sq.ft. during the past 6 months. Another way to look at this is that this will give you some idea of the average home sale.
- Volume – The number of homes being sold indicates that overall activity in the market. The lower the number the less active the market is meaning that fewer buyers are in the market.
In summary.... 2023 is starting out like an average year and returning back to a more tradition real estate market where both buyers and sellers will have room to “talk”. I will provide updates when the time comes should any of the these indicators should change. Meanwhile Happy New Year! Call me anytime for additional information!
or text me at 916-308-7642
John Ecklein
