Although there is uncertainty about the future of the housing market in 2023 and the U.S. economy in general, Wednesday’s keynote speakers at Side X Side conference in Long Beach provided agents and brokers with a source for optimism and reassurance.
Side’s cofounder and CEO Guy Gal reminded attendees that the market is subject to cycles and will continue to experience them.
Rick Sharga (ATTOM’s EVP of Market Intelligence), who spoke after Gal, said that the housing market is now cycling back up after slowing down throughout 2022. This was due to increased affordability issues caused by record-high home prices and rising mortgage rates.
Sharga stated that mortgage rates have not increased by more than 50% in any calendar year from the previous year to the present. “What you have now is a market which has not had the chance to adjust, and a market who has had to deal with the idea of their monthly mortgage payment going up by 50% compared with what they had planned to spend.”
Although there is talk that the Federal Reserve might pull off the “soft land” they hoped for with their interest rates hikes, Sharga stated that he still believes in a recession.
“If I bet these two data points, then the Fed is likely overcorrect to keep inflation under control. They have done this eight times in the last eleven times. This yield curve inversion means that the investment market can expect bad things to happen in the economy. Sharga stated that all this leads me believe that we will experience a recession in the coming year. “The good news is that most economists I follow believe that if there is a recession, it will be caused by the Fed overcorrecting, which will make it easy to get out. If we do experience a recession, it is likely that it will be short-lived and mild.
All hope is not lost. Sharga stated that he sees a scenario where affordability will improve and lead to a stronger second-half of the year.
Sharga stated that she sees a scenario in which interest rates on mortgages slowly decrease over the course of the calendar year. By the end of the calendar year, we will be in the 5% range. “So that combination, gradually lowering mortgage rates, home prices that have fallen or plateaued, and continued wage growth, makes affordability feel a lot more appealing, which psychologically makes buyers believe it might be time for them to return to the market.
Gal encouraged agents to continue to work, even though the industry is still waiting to see how this year will turn out. He said that he plans to do the same with Side.
You can either sail or paddle depending on the tides. Now, paddling is a necessity. Gal stated that sometimes you need to paddle against the current. The alternative is to go with it. Sometimes, the market allows you to let go of your sails. That was the market we were in two years ago. It was a tailwind market and no one had much to paddle, but this market will require you to.
“You must always make progress. Side is laser-focused on the big picture. He said that Side works tirelessly to create new companies and to support independents who are entering the community.
Mike DelPrete, an industry analyst and real-estate technology strategist, echoed these sentiments.
He stated, “The industry is moving very fast, and you can’t afford to stand still.”
Gal’s metaphorical tides are still tumbling, so the speakers recommended agents improve their businesses and become experts within their local markets to ensure they can thrive when they heat up again.
Gal stated that markets are slower and there is less transaction volume. This allows us to focus on refining and improving our products.