Local Knowledge is Key to the 2023 Market

The rapid rise in mortgage rates in early spring 2022, combined with the pressure of inflation and double-digit home price increases, took some of the steam out of the national housing market. As every Realtor® knows, the most important information is always local. More importantly, the ability of a Realtor® to provide niche neighborhood knowledge where they work is essential for every buyer, seller, and homeowner.

“It’s not yet a buyers’ market, but it’s becoming a much less stressful and chaotic time to buy compared to the past two years,” said Divounguy. “But today’s sellers aren’t desperate. They’re likely sitting on a massive amount of equity but are only going to enter this market if the benefit outweighs the costs.”

Nationally, the market is quickly rebalancing, which is a good thing for the long-term health of the residential real estate market, said Orphe Divounguy, a senior economist with Zillow.

For Realtors®, 2023 planning requires understanding local market trends and educating people about the nuances of New Jersey markets to compensate for negative national media stories.

“The frenzy has slowed a little, but the continued lack of inventory means we’re still seeing multiple bids in our market in early fall and sales above the asking price,” said Frank Isoldi, a Realtor® with Coldwell Banker Realty in Westfield. “I’m not seeing any price reductions. But around this time of year, I start to get calls from people who want to list their home next spring and that’s been a little slower at the moment.”

The Mortgage Bankers Association forecasts the 30-year fixed-rate mortgage interest rate will average 4.9% in 2023 and hover close to 5% for the entire year.

“Between relatively high mortgage rates compared to one year ago and higher home prices, buyers are spending more to buy than they were a year ago,” said Danielle Hale, Chief Economist for realtor.com®. “Some buyers have put their search on hold, so there’s generally less demand. And those buyers who are in the market are more selective, especially if they want to keep their monthly payment what it would have been at earlier, lower mortgage rates.”

Hale anticipates prices will continue to stay high and most markets will remain a seller’s market, while a few will move closer to a balanced market.

“A key metric that Realtors® can watch is what’s fresh on the market because that’s what will sell the fastest and excite buyers,” said Hale.

In New Jersey, Hale said, housing markets near New York City but are more affordable than Manhattan should continue to do well. “People are looking for value in the small towns and suburbs outside major cities now,” said Hale.

Nationally, competition is strongest for lower-priced homes because of higher mortgage rates and the entrance of new millennial and Gen Z buyers, said Divounguy.

“New Jersey home values have been somewhat insulated from the swings of the market over the past two years,” said Divounguy. “They didn’t grow as dramatically as the nation’s did over the course of the pandemic, but they are not cooling down as quickly either.”

In addition, inventory has been slower to increase in New Jersey than across the country.

“Total inventory in the state now stands at a greater deficit compared to 2019 than the nation,” said Divounguy.

The lack of inventory kept prices up and buyers competing even as mortgage rates rose in 2022.

“The lack of inventory is our biggest problem now, even more than higher rates,” said Megan Fox, a Realtor® with The Fox and Stokes Team with Compass in Ridgewood. “Demand is really high, especially for a moderately priced house in Ridgewood. Homeowners who refinanced don’t want to move unless they’re going into a rental because even if they downsize their monthly payment will be higher.”

Fox said buyers have already adjusted to higher mortgage rates, especially if they have a compelling reason to move.

“Buyers don’t buy when rates are at the bottom, they buy when rates tick up,” said Michele Messina, a Realtor® with RE/ MAX Villa in Edgewater.

Messina said buyer demand for real estate, especially income-producing multifamily homes, increased by stock market volatility.

“Buyers are running to real estate as a safer investment,” said Messina. “Prices aren’t coming down now [in early fall 2022], but it’s more important than ever to price the house to where its value stands now, not to generate a bidding war.”

However, stock market performance may cut into the confidence of some buyers, along with uncertainty about the economy, said Xinchuan “Diana” Tian, a Realtor® with Coldwell Banker Realty in Jersey City in partnership with her husband Saki Rahim.

“There really aren’t any red flags in our market yet,” said Rahim. “It’s not taking significantly longer to sell than it did in 2019, especially if the property is in flawless condition. But some buyers are waiting for 2023 because they think mortgage rates will stabilize and that the economy will be clearer.”

While Tian and Rahim don’t expect a significant downturn, they plan to increase their marketing efforts as the pace of sales slows.

“We’re investing in our business and our systems and hope to take more market share if activity slows more,” said Tian.

Since affordability is top of mind for most buyers, one tool buyers and agents can use is the new Buying Power Tool from realtor.com® , a label next to each listing for buyers who input their income, debt, and savings to determine their budget.

“Each listing will be labeled as affordable, a stretch, difficult or out of reach based on the information buyers provide,” said Hale. “Buyers can use this tool to filter choices.”

Since some buyers left the market temporarily to see what would happen with rates and prices, it’s important they get pre-qualified again with a lender, said Messina.

“We don’t need to know the details of their finances, but you do need to make sure all buyers are buttoned up with their mortgage financing before they make an offer or your sellers accept an offer,” said Messina.

Agents need to know their market very well and be proactive, said Isoldi. “They need to get back to basics and reach out to their past clients and their sphere of influence to see who wants to move and what people are thinking,” said Isoldi. “Look at places that have the highest appreciation and talk to those homeowners who have a lot of equity. Focus on door knocking and expired listings and FSBOs to get the message out that there is still a lot of buyer demand.”

People who are paying extremely high rent that continues to rise are less concerned about higher mortgage rates and are willing to buy now, said Isoldi.

“Agents need to check in with every buyer weekly and review every new listing,” said Fox. “This is a good time to adjust your marketing materials if you need to and to realize you have a little extra time in a slightly slower market to prep listings the right way and to educate your clients.”

Fox also recommends developing strong relationships with lenders who can identify financing options for buyers and help sellers evaluate their choices.

As the housing market shifts nationally and locally, agents with staying power are likely to double down on their outreach to potential clients and to increase their market knowledge.

“The more you do now, the more ready you will be when the market speeds back up again,” said Tian.