Redfin CEO Says 2023 Will Be Nothing Like 2008 | 2023 Market Predictions

Описание: Redfin CEO Glenn Kelman predicts that 2023 market correction will be nowhere near as bad as the last housing crash. In a recent AP interview he said: “The price declines, that people are worried could be catastrophic, are just unlikely to happen. So, yes, prices are coming down. But in 2008, 30% of homes were underwater. At the end of 2022, it was less than 2%. And even if prices fall another 5%, the number of homes underwater would be 2.2%”.

Well, in recent months Bay Area home prices were coming down too. The number of home sales last year was the lowest since 2008. Sellers stopped selling and the buyers stopped buying. It all was triggered by the runaway inflation that started in the second half of 2020. High inflation was to blame for the dismal housing market last year. But inflation started to turn in response to the changes in Federal Reserve policies. According to the latest numbers, the December inflation rate was negative 0.1% month over month and decreased to 6.5% on an annual basis, the lowest rate in more than a year. Compare this with the peak inflation of 9.1% we reached back in June.

Mortgage interest rates closely followed the inflation rates. The inflation reached its highest point in June and the mortgage rates peaked in November. Since then, the mortgage interest rate dropped by more than 1%. Seems like a small change, just 1%, but it is significant in our high-cost area. The difference between 7.1% interest rate and 6.1% is $634 a month on a $1M loan.
Slowing down the inflation rate also boosted consumer confidence – it jumped up by almost 7 points. And the proof for that are the 2022 Christmas sale results. Holiday sales were up 7.6% compared to 2021 outperforming the expectations, Mastercard SpendingPulse expected a 7.1% increase.

Combination of lower mortgage rates and increased consumer confidence may provide a boost for the Bay Area housing market. Already this year we saw homes sold with pre-emptive offers and multiple offer situations are developing more often than last November/December.

You would ask “but what about the high-tech layoffs”? Some pundits predict that these layoffs will force people to sell their homes creating an excess inventory that will drive the Bay Area home prices down. But if you look at the employment statistics, this scenario does not look quite realistic. According to the Silicon Valley Business Journal, about 50,000 workers were laid off in the Bay Area in 2022 and it sounds like the sky is falling. Don’t forget however, that the total number of workers in the Bay Area is more than 3.4M. So these layoffs make approximately 1.5% of the workforce. This unemployment number is way below the historic average for the Bay Area. It is very unlikely that this level of unemployment will trigger a massive sell-off of residential homes that will crash the market.

Let me stop for a second: I am not taking each individual layoff case lightly and understand the hardship these people are going through. In my high-tech days I was let go a few times. It was very stressful and disruptive to me and my family. Each time, however, I was able to recover, find a new job, keep my house and move on, same as all my colleagues.

The mainstream media feeds us fears that the recent layoffs will trigger an avalanche of foreclosures, but the top economists in the country have an opposite opinion. According to Attom Data Solutions research, the foreclosure rate in the US is 10 times lower now than during the last housing crisis. In 2022 only 0.23%, less than a quarter of one percent of all properties were subject to the foreclosure proceedings. Compare this to 2.23% of foreclosures in 2010.

In conclusion, the Bay Area housing market this year will be going through an adjustment similar to the 2018-2019 price shift. Then, home prices decreased by 4.5% on an annual basis. After the turbulent 2022 with its double-digit home price swing first up and then down, we should return to a “normal” market in 2023, thanks to the lower inflation and improving lending environment. With unemployment numbers remaining low and almost non-existing foreclosures, we can’t expect any significant increases in the supply of homes coming to the market either. The inventory will remain tight with stiff competition for the most desirable homes.

Michael Talis: (650) 766-6100
Coldwell Banker Realty
Web: https://yourhomeinsiliconvalley.com/
Email: https://www.yourhomeinsiliconvalley.c...
CALDRE: 01883499

0:00 - Introduction
0:20 - Redfin Says
1:17 - Dismal 2022 leads to a more stable 2023
2:57 - High-tech layoffs and housing market
4:18 - Foreclosures
4:51 - What to expect in 2023