Housing Market Trends
Home Sales and Prices
Existing home sales are projected to decline by 14.1% in 2023, with a corresponding decrease in the median price appreciation of existing homes to 5.4%. This reflects a shift from the record-high real estate wealth seen in the past decade.
Inventory Changes
The inventory of homes for sale is expected to grow by 22.8% in 2023, providing more options for buyers but challenging sellers with increased competition and longer sale timelines, according to a survey done by the National Association Realtors and Move Inc.
Rental Market Dynamics
The rental market is anticipated to continue experiencing growth, with a forecasted rent increase of 6.3%. Demand is particularly strong in urban areas within major metros, driven by rising housing costs and a preference for the amenities of city living.
Commercial Real Estate Outlook
Office Space
Office vacancy rates are predicted to peak in late 2024, with a slowdown in leasing activity due to uncertainty in hybrid working arrangements. Prime office spaces continue to attract tenants, while older buildings struggle.
Industrial & Logistics
Strong demand in this sector is expected to continue, with a projected increase in vacancy rates due to new construction outpacing tenant requirements.
Multifamily Sector
New construction and absorption levels in multifamily housing have exceeded forecasts, but annual rent growth forecasts have been revised downward.
Retail Market
Adjustments in rent growth forecasts are noted, with some markets beginning to experience negative absorption.
Economic Factors Affecting the Market
There are two key points of concern widespread among economic experts. The first is that the potential for a moderate recession extending into early 2024 will impact the real estate market, particularly due to higher interest rates and inflation. The second being the consideration of investor caution, with a significant decrease in purchasing activity in 2023, citing rising interest rates and limited credit availability as major challenges.
Accordingly, buyers are advised to focus on affordability and consider cross-market opportunities, leveraging tools like online calculators to assess their purchasing power, while sellers need to set realistic expectations and may need to offer concessions or flexibility to attract buyers in a more competitive market.
The 2023 real estate market presents a unique landscape, with shifting trends in both residential and commercial sectors. While buyers may find more options and less competition, challenges in affordability and high mortgage rates persist. On the commercial side, changes in office space utilization and the continued growth in industrial and logistics mark significant trends. Overall, market participants will need to adapt to these evolving conditions to navigate the real estate market successfully in 2023.