Compass' Chief Evangelist Leonard Steinberg recently laid out what he predicts for the spring of 2023. What do you think about what he has to say?
The TOO FAR, TOO FAST market
I'm a bad fortune teller, so everything you read here is pure theory. What actually happens may be different, although when it comes to markets I've been correct in the past. As someone who was in fashion for a decade, its in my DNA to look forward to coming seasons many months in advance, so today I predict the SPRING of 2023 will see a turnaround to our current markets and world/economic woes. Here is my THEORY and OPINION... a peek into a crystal ball that has been a bit foggy at times, but....
1. The impact of the Fed's rapid interest rate hikes will have caused a notable economic slowdown. This will be global.
2. Many prices will have come down, some more than others, and the deflationary pressures will register in inflation numbers.
3. Some prices in some areas will have come down. Some won't and some will continue to rise, but at a much more sane, lower pace of increase.
4. Many sellers will have adjusted asking prices downwards and be more realistic about expectations.
5. Many sellers will have withdrawn their homes from the markets and be in 'wait and see' mode.
6. Many sellers will have opted not to sell and hold on to their low interest rates for dear life.
7. Many who re-financed in the past 2 years have about 5 years left with their current rate.
8. Many builders will have cut back production fueling more shortages. Many will be able to lower prices as commodity prices come down....a wee bit.
9. Many for sale properties will be rented instead. While the rental market will stay strong, the pace of price increases will slow in many areas and even decline in others.
10. Those seeking to upgrade their properties will have found opportunity in the past 6 months: a 5% discount on a $3 million home nets you lots if you are taking a 5% discount when selling a $1 million home.
11. Many people will lose their jobs, especially the less wealthy who are not traditionally home buyers. This will cause downward pressure on some rentals that escalated too far, too fast.
12. The FED will realize they went too far, too fast. They may even lower rates.
13. Several months of buyers 'on hold' will have compounded and people will realize life goes on. They will re-enter the markets realizing spending money on rent does not compound equity.
14. Some areas will be hit harder than others, especially where pricing escalated at extremes without longterm population growth trending.
15. The rich will find opportunities to make more money than ever: loaded with cash, they are always in the best position to buy discounted assets.
16. We will have seen a season of retail sales unlike any other as retailers are very over-stocked having assumed the COVID-CRAZY markets would go on forever.
17. The Russia-Ukraine war will have ended and oil/gas prices will dip, not plunge. OPEC still controls these markets. The awakening to our need for energy independence has happened already. This will accelerate.
18. The 2022 elections will have come and gone and hopefully be 100% settled by Spring 2023 too.
19. The Dollar will have weakened and foreign buyers may be re-enticed to enter US markets.
20. Spring always infuses optimism. I may be Polly-Anna-crazy, but there is an excitement of rebirth and renewal that fuels ALL thinking. Maybe also a time to think about getting on with life: It's short!
In my humble opinion, the FED is out of sync with current conditions and it will take several months for them to see what you and I see already. They were as out of sync when prices were escalating dramatically and did nothing. If the FED's mission is to clip high inflation, I would say it's working already. Remember, inflation measures the rate of price/cost INCREASES. So, if prices were to stay exactly where they are today and not budge - and prices are very, very high on lots of stuff already - inflation would be .....ZERO.
I am cautiously optimistic that the SPRING of 2023 will represent a re-awakening and renewing of ALL things....including the real estate markets. Some who agree with me may seek opportunity before that moment arrives.....