Although there is much uncertainty about the housing market in 2023, as well as the U.S. economy overall, Wednesday’s keynote speakers at Side’s Side X Side conference in Long Beach, California, gave the agents and brokers in attendance a source of optimism and a sense of reassurance.
“The market goes through cycles, and it will always go through cycles — the only constant thing is that it will change,” Guy Gal, Side’s co-founder and CEO, reminded attendees.
According to Rick Sharga, the EVP of market intelligence at ATTOM, who took the stage after Gal, the housing market appears to be cycling its way back up after progressively slowing throughout 2022 — which was caused by increased affordability issues due to record high home price appreciation and rising mortgage rates.
“According to Freddie Mac, mortgage rates have never doubled in a calendar year before until last year,” Sharga said. “What you are dealing with now is a market that has not had a chance to adjust and a market that has had to cope with the idea that their monthly mortgage payment would go up by 50% compared to what they were planning to spend.”
While there has been talk that the Federal Reserve just might pull off the “soft landing” they had hoped for with their interest rate hikes, avoiding a recession, Sharga said he feels like a recession is still likely.
“If I am betting these two data points, the Fed is likely to overcorrect in order to get inflation under control as they have done eight of the last 11 times, and this yield curve inversion, which means the investment market is expect bad things in the economy. All this leads me to believe that it is more likely than not that we will see a recession this year,” Sharga said. “The good news is that most of the economists I follow believe that if we do have a recession, it will only be caused by the Fed overcorrect, which means it will be fairly simple to get out of. So, the likelihood is if we do have a recession, it will be fairly short and fairly mild.”
But all hope is not lost. Sharga said he sees a situation playing out where affordability will improve, leading to a stronger second half of the year.
“I see a scenario where over the course of the year, interest rates on mortgages gradually lessen, and we are down in the 5% range by the end of the year,” Sharga said. “So that combination of gradually lowering mortgages rates, home prices that have plateaued or slightly decline, and wage growth continuing, that makes affordability feel a lot better, which psychologically makes buyers think it might be time to come back to the market.’
In the meantime, as the industry waits to see exactly how this year plays out, Gal told agents to keep progressing, something he said he plans to do with Side.
“Depending on what the tides do you can either paddle or sail. We are now in a market where paddling is required. Sometimes you have to paddle against the current,” Gal said. “The alternative is to just go with it. Sometimes the market lets you throw up your sails. Two years ago, that was the kind of market we were in. It was a tailwind market, and no one had to do much paddling, but in this market, you will have to.
“You constantly need to make progress. At Side, we are laser focused on the big picture. We work tirelessly to create new companies that are part of this company and to support independents that are coming into this community,” he continued.
Industry analyst and real estate technology strategist Mike DelPrete echoed this sentiment.
“The industry is moving really fast, and you cannot afford to stand still,” he said.
As agents wait for Gal’s metaphorical tides to turn, the three speakers suggested agents take steps to improve their businesses and become experts in their local market so they are ready to thrive when things heat up again.
“Markets are slower, there is less transaction volume, and we can focus on polishing and refining and making things better,” Gal said.
