Real Estate Market Predictions for 2023-2024
It seems like everyone has a prediction these days, so I figured I would throw mine in the ring with yours and we can openly debate the future of the real estate market - of which no one actually knows. Attempting to predict the future is a fairly useless, yet entertaining, endeavor unless you also create a contingency plan for each potential outcome.
So here’s my unsolicited thoughts about where things are headed in the real estate market, how I’m playing it, and why. My general philosophy is to hope for the best, plan for the worst. Planning for the worst has served me well as a business owner over the last few years.
Now, my predictions are mainly geared for Northeast Florida but they likely can also apply to many markets that have skyrocketed over the last 24 months.
Note: For those of you who like to debate, correct, I’m not supplying all the data, so let’s just say this is an anecdotal prediction, one simply based on personal opinion. It’ll be fun to look back on this two years from now to see what I was thinking and why.
Jon’s Real Estate Market Predictions for next 18-24 months:
Thesis of Prediction:
Fed pushed $ into the system, now they’re pulling it out to fight the inflation they caused.
IF the Fed continues this path of raising rates the way they stated at their last meeting, these are my predictions. My predictions change depending on what the Fed says it is going to do and my confidence level that they’re going to follow through.
1% increase in mortgage rates = 10% less purchasing power for real estate.
Affordability index is already at 69, way lower than it was in 2007. This means that homes are very unaffordable to the median buyer buying a median price house. This is an affordability crisis.
Even if there is demand to purchase homes, it is not affordable to most buyers anymore. It will take time for wages to increase OR for prices to come down.
Expectations:
Demand from relocations (high cost/high tax states) has already slowed and will continue to slow. The buyers from these states have already made their move (due to COVID, low rates, speeding up their moves). I wouldn’t expect that temporary rate of relocation to continue at the pace that we had the last two years since it was primarily artificial.
Supply is coming to market from single family and multi family all around Jacksonville/St John’s from new construction. There is construction all around Northeast Florida, and even more land to build on, so nothing is really constraining supply moving forward (other than construction which is working its way through).
Deals are falling through with new construction due to rising rates / no rate locks, homes coming back on market at more rapid rate. We should see more homes come back on the market in the next 6 months than we are already seeing now.
We haven’t even seen the drop really start, my expectations is that we will see a drop in sales & prices in Q1-Q2 2023 as there’s a lag in rate hikes impacting the economy & showing up in data.
Other factors include student loan repayments starting again at beginning of the year and a backlog of foreclosures coming through that were paused by COVID.
Prediction for next 18-14 months:
Residential # of sales down an additional 20% YoY in 2023 (currently down 26.7% YoY).
Residential property prices down 20% in next two years due to affordability crisis, less demand from relocations, + added inventory/competition.
Rent decreases of 10% on Single Family Rentals and Multi due to increase supply/competition. We will see vacancies go up in the next 6-12 months.
General Multi-fam prices down 20% in next two years due to rates up + rents down up to 10%.
Beyond that, I think there will be a great time to buy investments when prices begin falling and stall at a bottom. When prices fall and are close to their bottom - even with high rates, it’ll be an incredible time to buy. That’s because when rates come back down, you can refi, and your deal that you purchased at a lower price (and now have a low rate) will be a home run.
At some point, yes, my prediction is that rates will come back down.
Contingency Plan Today:
Cut expenses fast and deep
Save cash on the sidelines for opportunities
Invest in organic growth and community
Build more relationships than ever before
Cutting your expenses and saving cash will increase your runway, so you don’t have to worry as much what happens in the market. Then by focusing on the community & relationships, you have a long-term outlook that will eventually be rewarded (beyond just being personally rewarding relationally).
Would love to hear your predictions and why they are your predictions - Jon Brooks - jon@movewithmomentum.com.
