2023 Likely to Be a Lackluster Year

Special to the Herald-Tribune

 

Each new year is generally accompanied by a flurry of forecasts in every industry, with the self-proclaimed soothsayer expounding predictions on the future environment and performance. Count me among them in most years, though Jimmy Cliff’s sunny song (made famous by Johnny Nash) “I Can See Clearly Now” is most definitely a tune I’m not crooning. Therefore, I won’t be so bold as to share a personal prediction but rather draw upon others with some individual observations.

 

December’s figures won’t be known for a couple of weeks, yet there’s little reason to believe the direction will drift from that experienced over much of 2022. With inflation causing interest rates to double and general insecurity about the macroeconomic outlook, sales of existing homes have fallen for a record 10 straight months and are now approaching an annualized rate not seen in more than 10 years. Many now consider themselves priced out of the market or see little incentive to act on a discretionary purchase, and no doubt much demand normally expected was pulled forward. The trajectory off the sugar high of the last two years was inevitable, with uncertainty only over whether we would return to a normal pace or potentially overcorrect. The latter, at least for now, appears to be the case, yet in no way comparable to the great housing recession.

 

As to 2023, the consensus reflects an underwhelming first half of the year with moderate improvement achieved in the second half. A blended perspective implies closed sales will decline more than 10% year-over-year, yet home prices will witness minimal downward pressure. The latter is attributable to a variety of factors, most importantly inventory levels, which have rapidly grown yet remain far under what is considered a historically balanced market.

 

With values relatively protected and home equities swollen from the supercharged asset growth of recent years, delinquencies and forced sales will be practically nonexistent. To the great disappointment of opportunists, few bargains will be found, and real estate will return to what it was always meant to be something you buy because you need, or you want with the intent of keeping for years to achieve longer-term financial benefit.

 

The year 2023, in both the general economy at large and in housing, is likely to prove a lackluster year in which we find the bottom and anticipate growth in the year beyond. Consider it a mulligan in an otherwise successful round of golf, and there’s every reason to be optimistic over the longer term.

 

Demographics continue to be on our side. Not only does overall population growth reveal the massive underbuilding of residential products, which ensures future demand, but Florida was just recognized as the fastest-growing state in 2022. So while our state may be imperfect, it’s quite clear it’s a lot better than many others in the minds of most. Also, after seemingly distracted by everything else but insurance, our state politicians finally acted to boost the viability of insurance markets, reduce litigation, and put citizens in a more sustainable position. Availability of insurance is a key factor in our future housing health. Confidence is further boosted by legislation to require structural inspections of older condominiums and validate the strength of their Association reserves. And I could go on.

 

Yes, despite the lull, there are positives in the year ahead for real estate, along with the knowledge that we get to live in an amazing place with amazing people who are simply happier than in so many other places. We simply need a few more new residents to join us in the year ahead.