We All Got 2022 Wrong, So What’s Coming in 2023?
Absolutely Everyone Predicted 2022 Wrong
Wall Street, Washington, the Fed, and housing experts all across the country completely missed the mark about 2022. At this time last year inflation was expected to be transitory. It wasn’t. Interest rate increases were expected to be modest. They weren’t. And the housing market was expected to continue its fast upward trajectory. Which it did… until interest rates pushed back with force.
What to Expect in 2023 from Utah’s Housing Market
To the extent to which we were all wrong-footed in our predictions last year has left many looking at the coming year with a sense of unease. The drastic change in interest rates startled everyone and certainly shook things up a bit, but despite the rapid change of pace, the Utah housing market and economy remains resilient and healthy.
Home Prices Higher Than a Year Ago, But Down from Peak
The 2022 median sold price for detached homes in Salt Lake County, came in at $605,000, which is a 13% increase from 2021’s median price of $533,000. Total sales slowed dramatically in the second half of 2022 and finished the year down 24% from 2021’s totals. The total amount of homes listed for sale was down slightly, just 7% year-over-year. Which in turn kept the pace of our housing market quick, with an annual median days on market of 11.
The 2022 median sold price for detached homes in Salt Lake County, came in at $605,000 – a 13% increase from 2021’s median price of $533,000.
Summit County’s annual median sold price for detached homes came in at $1,720,000 which is a more moderate increase of 4.25% from 2021, but still notable. Total sales slowed more significantly, down 37% from 2021. Median days on market also changed substantially, up 37% to 26 days in 2022.
Be Prepared for Anything in 2023
If there is wisdom to be gleaned from the past few years, perhaps it is simply to be prepared for anything. Remember January 2020? Predictions were wrong that year too. But despite bold predictions being a bit of a fool’s errand right now, we all can’t stop the urge to make them.
National Housing Experts Predictions for 2023
The National Association of Realtors believes there will be a return to “normalcy” in 2023. It isn’t exactly a bold prediction based on the last six months, but it does feel accurate to us. NAR Chief Economist Lawrence Yun recently stated, “[t]he ongoing housing supply challenges will prevent home prices from falling, though price appreciation will slow” in 2023. He went on to say that after the “big boom over the past two years, there will essentially be no change nationally… half the country may experience small price gains, while the other half may see slight price declines.” Their forecast is that home prices will essentially stay flat in 2023.
However, Realtor.com has a bold prediction of a 5.4% increase in existing home prices for 2023. “We think price growth will be half of what it was in 2022, and we may see some months of year-over-year declines… [b]ut overall, we believe prices will be higher. [Housing] shortage conditions are still going to be present in the market.”
The National Association of Homebuilders are not optimistic at all about their particular segment of the market. They are forecasting a double digit decline in housing starts in 2023. Mortgage rates, higher material costs and lending issues are all compounding factors preventing more construction. And while lumber prices have eased, construction costs remain 14% higher due to other shortages. Nationally, new home sales make up about 10-15% of the market.
Finally, real estate data firm CoreLogic also predicts that home price growth will largely “level off” in Q1 2023 and “remain flat” for the remainder of the year. But they also say that it will “vary greatly across the country” with the areas that surged during the pandemic possibly showing price declines.
Inflation – The Wild Card
Given the intense ride of the last few years, a flat, predictable and stable market is probably appealing to most. But what could change this? Inflation and rising mortgage rates. Rates more than doubled in 2022 – something that’s never happened before in a calendar year. Nobody expected it. Which means that the pace and potential volatility in the 2023 housing market is going to be almost entirely defined by mortgage rates, and rates will be determined by what happens with inflation.
Rates more than doubled in 2022 – something that’s never happened before in a calendar year.
What This Means For Utah
A lack of housing supply continues to impact our local real estate market here in Utah, especially given our strong economy and job growth. Peak pricing for us occurred in the late spring of 2022. And although prices across the state have since moderated, they are still very strong and homeowners have gained substantial equity the last few years.
This spring the market will be more balanced between buyers and sellers, which is welcome news. On average, homes listed for sale today take about a month to receive an offer, and sellers are offering more concessions and are overall much more willing to negotiate. This is what a “normal” real estate market looks like for us. If mortgage rates continue to stabilize in the next few months, prices will too, and we would then expect that by the end of 2023 Utah home prices will still be strong.
Because the last two years have been so volatile, it is easy to extract data from a small segment of the market, or a small period in time, and show jaw-dropping statistics. While these headlines may not be technically inaccurate, they are certainly not a reflection of the overall housing market. If you see these headlines and have questions, don’t hesitate to reach out.
The best way to keep a pulse on what is happening in our market is to lean on us. Give us a call, send us a text, and ask us your questions – we know this market and are here to help.
