Late January’s winter storm in the D.C. region may have pushed back the start of the spring housing market, but realtors said signs are already pointing to a busy season ahead.
Late January’s winter storm may have pushed back the start of the spring housing market, but realtors said signs are already pointing to a busy season ahead.
And even with some snow and ice still melting, buyers are out there, which experts said is a sign that a lot more activity is on the way.
Even during what would normally be a slow stretch because of cold, agents said interest is picking up.
“The last two weekends have had a lot of examples of multiple offer properties,” said Corey Burr with TTR Sotheby’s International Realty.
Burr said the storm delayed the spring market by about three weeks, but buyer interest never fully cooled off. He also said he believes the anxiety that slowed last year’s market is fading.
“I’m expecting a very big spring market in Washington,” he said.
Burr said each property type is acting like its own submarket this year. Some homes are seeing heavy competition while others sit longer. As condominiums in D.C. remain challenging because of aging buildings, special assessments and high fees, family sized homes in convenient neighborhoods are drawing the most attention,
“I would say, around a million dollars, say 750 to a million, seem to be affordable for many people in the area, and those are the ones that really are flying off the market very quickly,” he said.
Weather has also played a major role. The snow and ice delayed many listings, and Burr said sellers have been waiting for better conditions.
“We’ve postponed a number of listings, and we’re aiming towards March 1 for many of them, and I think that’s when the spring market is really going to take flight,” he said.
Burr said the strongest period of the entire season is coming soon. He calls it “the really big eight-week period,” which he said goes from mid-March to mid-May.
Last year’s softer market is also part of the story. Burr pointed to several factors that dampened activity a year ago.
“Last year, the market just had a very difficult time, when we considered DOGE and the tariffs and the extended government shutdown, people just lost their confidence to buy real estate for the most part,” he said.
But recent activity shows that confidence is returning.
“Yes, I think the anxiety from last year is wearing off,” he said.
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The East End continued to dominate Long Island’s presence on the annual list of the 100 priciest zip codes in the U.S.
Nine of the 11 Long Island locales that made the top 100 list are on the East End, with Sagaponack grabbing the third spot and Water Mill at number five. Last year, Sagaponack was second and Water Mill was third.
Here are the Long Island zip codes and their median home sale prices on the 2025 top 100 list from PropertyShark.com:
#3 Sagaponack, $5.925 million
#5 Water Mill, $5.5 million
#12 Wainscott, $4.5 million
#36 Amagansett, $2.998 million
#39 Bridgehampton, $2.875 million
#40 Old Westbury, $2.864 million
#46 Quogue, $2.723 million
#85 Fishers Island, $2.213 million
#90 Sag Harbor, $2.185 million
#91 Southampton, $2.175 million
#99 Manhasset, $2.05 million
The top spot went to Fisher Island in Miami Beach with a median of $9.5 million, which knocked Atherton, Calif. ($8.333 million) to number two.
California again ruled the top of the priciest zip codes list with eight in the top 10. After Atherton, Newport Beach, Calif. had three zip codes in the top 10, with ($5.72 million) at #4, ($5.188 million) at #8 and ($5.1 million) tied with Los Altos, Calif. for #9; Santa Barbara, Calif. ($5.24 million) was #6; and Rancho Santa Fe, Calif. ($4.995 million) at #10.
This year, $2 million was the minimum median sale price to make the top 100, while five years ago, fewer than 50 of the most exclusive zip codes had reached that mark. For the first time, 10 zip codes had median sale prices of over $5 million.
To determine the most expensive zip codes in the U.S., Property Shark looked at residential transactions closed between Jan. 1, 2025, and Sept. 30, 2025, including condos; co-ops; and single- and two-family homes. Median sale prices were rounded to the nearest $1,000.
Only zip codes that registered a minimum of five residential transactions were considered.
Voters rank the economy and inflation as the most important issues facing the country, and in spite of good news on both fronts, discontent over pocketbook issues remains steady. There’s one stretch of Southern California where, one could say, that all began: Los Angeles’ harbor and coast.
As the center for U.S. Pacific trade and an archetype for exuberant housing markets everywhere, the region’s waterfront clarifies why so many Americans feel frustrated and under pressure — and just how challenging it may be to fix this, no matter who becomes the next president.
Stretching back to the mid-19th century, when the United States annexed Southern California from the Mexican Republic, Americans looked to Pacific trade and westward settlement to stabilize their nation. That’s why our local ports were developed.
In the 1850s, a federal agency, then called the U.S. Coast Survey, identified San Pedro Bay as a focal point for shipping efforts. Since the 1910s, this has been home to the Port of Los Angeles and the Port of Long Beach, collectively the busiest shipping hub in the Western Hemisphere, making the region prominent in global supply chains and transpacific trade.
Officials believed Pacific trade and settlement to be a safety valve for turmoil back East, that over slavery most of all. The results proved them wrong. Commerce and settlers intensified political conflict, both in Washington and in California, by increasing the stakes. Land speculators — in most places pushing out Indigenous people and Mexicans — looked to grab former rancho claims near California’s prospective harbors, in Southern California’s enviable climate. It was a rush for beachfront property like the region had never seen. Their actions set Los Angeles’ property lines and the basis for today’s real estate markets from Malibu to Newport Bay.
This history was invisible to me as I grew up around L.A., but its effects were and are all around, continuing to reshape Southern California during my lifetime. By the early 2000s, container ships, larger than before, accumulated in the outer waters as the ports were sometimes overwhelmed. Semitrucks crowded the 110 and 710 freeways. At the same time, the coastal real estate market boomed yet again. My parents — new arrivals to the region — found it full of opportunity. They purchased their first and only home, in a subdivision on former rancho lands, and they paid it off as valuations exploded around them and their nest egg grew. The region’s economy was a dynamo, a safe harbor in more ways than one.
Shipping and competitive real estate — two legacies of 1850s Southern California — remain with us. Moreover, they are part of an ongoing story of Los Angeles and its place in American life. Today’s voters’ sense of their economic well-being is based on the prices of household necessities, mostly imported goods, and about one-third enter the U.S. through the ports of Los Angeles and Long Beach. Historically, the ships and containers that crowd San Pedro Bay have expanded affordability, but the COVID-19 pandemic and international crises disrupted their flow. Suddenly transpacific trade was blamed for soaring costs, not credited with making household items affordable. Even after the disruption abated, high prices and memories of scarcity have lingered. Nationally, politicians and the public have come to doubt the virtues of globalization. The clash between high hopes for Los Angeles’ harbors and the realities of global trade contribute once more to Americans’ sense of an uncertain world, and once again the high stakes linked to Southern California’s economy feed into tensions nationwide.
Sure investments, meanwhile, no longer offset troubled times. Americans’ primary investment — triumphant in the post-World War II era — is the single-family home. However, the nation’s high-priced real estate has unsettled this convention. Rather than absorbing newcomers and providing a path to financial security, it has multiplied voters’ sense of distress by locking many out of homeownership. The exhilarating prices and low interest rates of recent decades — profit and security to prior home purchasers — now put inflationary pressure on renters and prospective buyers, and on middle-income, low-income or young voters especially. This is most true around coastal Los Angeles, west and south of the 405 Freeway. It is true as well in markets farther afield, such as Phoenix and Las Vegas, long shaped by Southern California migrants and money.
The Southland’s residents and visitors were drawn to the promise of Pacific waters, just as generations before have been. And while many in all eras have benefited from the region’s industries and real estate appreciation, many others have always been left behind. Remembering such connections with history can clarify uncertain times. Recent polarization in U.S. politics has been compared to the Civil War era, but there is perhaps a more apt parallel between today and the 1860s: the economic ideas of trade and land investment, intended to calm political passions and to distribute prosperity, fell short in both moments.
The consequences will play out in the months ahead as pocketbook issues quite likely decide the presidential election. But regardless of the election’s outcome, we should understand that Southern California is never a place apart from U.S. politics and its dilemmas. Instead, these have deep roots in the region. And today, the region continues to invest in imports and real estate as vehicles for prosperity — even as the adverse costs accumulate in national politics.
That makes Southern California the opportune place to resolve these dilemmas of history and to lead the U.S. forward, whether by policy experimentation or new principles for how wealth might be built, sustained and shared. Shaping the nation’s better future will involve tough choices. It certainly will take visionaries and daring. Yet that, too, is a legacy of Southern California’s past, one ready to be reclaimed.
James Tejani, an associate professor of history at Cal Poly San Luis Obispo, is the author of “A Machine to Move Ocean and Earth: The Making of the Port of Los Angeles and America.”
Trump Victory Could Ignite Massive Refinance Boom And Record Home Sales, Experts Say
Many Americans, who are generally not satisfied with today’s economy, are focusing on the 2024 presidential election. The U.S. real estate industry and many other sectors are speculating on the implications of a potential second term for Donald Trump.
Many economists have considered what a second presidential term under Trump would mean. They’ve provided insight on everything from interest rates and tax cuts to housing prices and inflation.
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Marty Harlee, president and CEO of First Trust Financial, said he expects Trump to recommend to the Federal Reserve that it lower interest rates to keep the economy moving quickly.
“If former President Donald Trump should win the upcoming election, we would see another massive refinance boom along with a record number of home sales,” Harlee told GOBankingRates. “Lowering rates would move every other industry upward as well.”
Dennis Shirshikov, a professor of finance, economics, and accounting at the City University of New York, said that the Trump administration’s economic policies would likely focus on deregulation and tax cuts. These could stimulate economic growth and increase disposable income for many Americans. They could also benefit the housing market by increasing demand for homes.
“For instance, the Tax Cuts and Jobs Act of 2017, which Trump signed into law during his first term, led to an increase in after-tax income for many individuals and businesses, providing more capital for home purchases and investments in real estate,” Shirshikov said.
With the rising cost of living and affordability among the major concerns many Americans have, housing and construction are being discussed more in the political arena, said Kateryna Odarchenko, a political strategist who also has a real estate license in Maryland.
“Donald Trump’s 2024 campaign includes several initiatives related to the housing market and construction sector, building on the policies from his previous term,” Odarchenko said.
During his first term, Trump worked on increasing homeownership rates, extending eviction moratoriums during the pandemic, and proposing the privatization of Fannie Mae and Freddie Mac.
“These efforts have implications for future homebuyers and the housing market at large,” Odarchenko said. “His administration also introduced tax reforms such as opportunity zones to stimulate investment in underdeveloped areas and capped property, income and sales tax deductions, affecting homeowners differently across the country.”
If Trump is reelected, the real estate market could suffer. If rates come down, housing prices will increase, and the available supply will decline, Harlee said.
“In general, interest rates and the housing market always do well with Republicans in office,” Harlee said. “I think it’s safe to say the same would be true if Trump wins reelection.”
Shirshikov said that deregulation and tax cuts can stimulate economic activity. Still, they can also lead to inflation, which could cause the Federal Reserve to raise interest rates to control it. That may make mortgages more expensive and reduce housing affordability.
“Trump’s tenure was marked by significant market volatility, partly due to his unconventional approach to policy and communication,” he said. “This unpredictability can create uncertainty in the housing market, causing potential buyers and investors to hesitate.”
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In the table below, you’ll find the top Halifax neighbourhoods for real estate purchases. To view all the data, slide the columns right or left using your fingers or mouse. You can download the data to your device in Excel, CSV and PDF formats.
Source: Zoocasa
Top three neighbourhoods in Halifax
For the second consecutive year, Cole Harbour is the top place to buy a home in HRM. Located east of Dartmouth, Cole Harbour is named after a local harbour. It has easy access to Highway 107 and Highway 111, making it an attractive location. Cole Harbour’s 2023 benchmark home price was $505,774, and that’s the result of consistent price growth in recent years. The benchmark price was 13% higher than in 2022, 66% higher than in 2020, and 69% higher than in 2018, giving Cole Harbour a value score of 4.0. It also has a neighbourhood economics score of 4.3, the third-highest in HRM.
The area has several schools—a convenience for the above-average 47% of households with kids. Residents love the area’s beaches and trails, including the Salt Marsh Trail and Rainbow Haven Beach Provincial Park. Cole Harbour is also a popular tourist destination: the quaint Cole Harbour Heritage Farm Museum and Fisherman’s Cove are two must-see stops. However, with the neighbourhood’s accessibility score of 0.6, you’ll likely need a car to get around.
View Cole Harbour real estate listings on Zoocasa.
Situated on the Eastern Shore of HRM near the Shearwater Canadian Air Force base, Woodside-Eastern Passage is a popular destination for military families due to its mid-sized community feel. Boasting a dozen eateries, convenient access to Halifax through the Woodside Ferry, the main Nova Scotia Community College campus and abundant character, this emerging neighbourhood proves to be a smart investment and a delightful place to live. Woodside-Eastern Passage’s benchmark home price was $432,486 in 2023, which was 18% higher than in 2022, 64% higher than in 2020, and 97% higher than in 2018. It’s the only neighbourhood in HRM with a perfect value score of 5.0.
The area features multiple recent subdivisions that provide a variety of housing options, including semi-detached and detached homes. There are many elementary, junior high and high schools that cater to the 45% of households with children. Like most places in HRM, you’ll likely need a car to live here, though.
Located a mere 10 minutes from the airport and 30 minutes from downtown Halifax, the Waverly-Fall River-Beaver Bank area is renowned for its scenic landscape, featuring numerous lakes, expansive open spaces and generously sized lots. It also has the most expensive homes of the top three neighbourhoods on our list, with a 2023 benchmark price of $666,815. That was 8% higher than in 2022, 62% higher than in 2020, and 83% higher than in 2018. Notably, Waverly-Fall River-Beaver Bank has the second-highest economics score on our HRM neighbourhoods list.
All homes in this area use septic systems; some rely on wells for water, while others are connected to city water. Residential lots are spacious and feature a range of traditional-style homes. Many residences boast lake access, and some even enjoy a lakefront setting. The neighbourhood has many sought-after schools. While the area may have limited amenities, it boasts a well-established canoe and kayak club, multiple daycare facilities, a post office and a convenience store. Living in Waverly-Fall River-Beaver Bank may necessitate owning a car, given its accessibility score of 0.1.
What’s happened in the Halifax real estate market?
Unlike the ups and downs of 2022, Halifax real estate prices did not sharply increase or decrease in 2023. The benchmark price consistently rose from January through the end of the spring market and reached a late peak of $530,900 in August. Following this, home prices softened before experiencing a modest rise in December, settling at a benchmark price of $511,600.
“In the first quarter of 2023, prices and sales were up, but then the market really slowed down after the spring,” says local eXp real estate agent Richard Payne. (Zoocasa, the author of this study, is wholly owned by eXp World Holdings.) “Properties were lingering on the market longer, and we didn’t see multiple offers on a home anymore. By the second half of the year, buyers had shifted to a more cautious stance, preferring to wait on the fence to see how conditions would evolve.”
As interest rates rose in the summer, buyers experienced some frustration, which morphed into confusion about what to expect from the market, says Payne. “Once buyers got confused, they didn’t feel confident to make any decisions, and this contributed to the slowdown in market activity.”
The uncertainty also influenced buyers’ budgets. “A lack of affordable options, especially in the $400,000 to $600,000 range, pushed many buyers to look out of the core and into more of the suburbs,” says Payne. “Homes in that range were getting more attention as interest rates rose.”
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What’s next for real estate in Halifax?
The benchmark home price in Halifax has increased by a little more than 1% since December, reaching $518,500 in January. With demand expected to rebound, price growth will likely continue, though that will depend on the mortgage rate outlook.
Payne expects the opposite of 2023 to unfold in 2024—with a quiet start to the real estate market, followed by an active second half. “In the beginning of 2023, activity was fairly up, and then as interest rate hikes were announced, it put the brakes on momentum,” he says. “This year, I anticipate a surge in activity in the second half of the year as buyers catch on to falling interest rates and rush back into the market.”
Buyers who were sitting on the sidelines last year may be better positioned to join the market in 2024. An influx in buyer activity might also encourage more sellers to list their homes, leading to a much-needed bump in the number of homes on the market.
What are your options if you find yourself in this situation? Let’s look at the intricacies of buying a pre-construction home in Canada, why some buyers are having difficulty closing on their purchases, and steps you can take to avoid losing a large deposit.
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How does buying a pre-construction home work in Canada?
Generally, pre-construction homes offer several key benefits. For one, the property is brand new. Unlike with a resale home, you can customize a new home right down to the finishes and countertops. And because the home is new, you can expect to spend a lot less on repairs and maintenance.
New homes also give you more time to save. With resale homes, you typically must pay the deposit and down payment within a 30-to-90-day timespan. With new homes, the deposit can often be spread over several months or years.
In case you’re new to buying pre-construction homes in Canada or you’d like a refresher, here are some important details to be aware of.
Payment schedule for pre-construction homes
Unlike a resale home when you usually pay the deposit within 24 hours of your offer being accepted, with a pre-construction home there’s typically a deposit payment schedule.
With a pre-construction home, you’re usually expected to have a down payment of between 20% and 25%. This may sound like a lot at first, but the amounts are spread over several months and years. For example, you may be asked to make a deposit of $3,000 at the time of making an offer, followed by 5% within 30 days of the offer, 5% within 90 days, 5% within 180 days and a final 5% at the time of occupancy.
Oftentimes, the deposit structure is up for negotiation. If the builder’s payment schedule doesn’t work for you, you should try to negotiate one that does.
Mortgage rules for pre-construction homes
In Canada, mortgage rules are the same for a new home as a resale home. For example, you’re required to pass the mortgage stress test in both cases. However, a key difference is timing. With a new home, you don’t know what mortgage rates will be when the property closes. Mortgage rates could be the same, or they could be higher or lower. This adds uncertainty. Without knowing what mortgage rates will be, you actually don’t know if you’ll be able to afford the property in the future.
There’s also the issue of the property value for mortgage lending purposes. Lenders don’t sign off on the mortgage for a pre-construction home until the time of closing. You make an offer without financing, then hope to get financing at the time of closing.
As an example, someone who considered themselves fortunate to secure a 5-year variable rate mortgage at 0.9% in early 2022 may have seen their interest rate soar to 5.4%, leading to a significantly higher required payment. For some, this situation is painful, and for others, it becomes unmanageable. In extreme cases, selling the home they purchased just a few years ago, because they can no longer afford it, may be their only recourse.
Source: Michael Pe, CFA
Furthermore, demand from foreign buyers has also been curtailed by the Canadian government’s recent ban on non-Canadians purchasing property. Resident investors, who have significantly contributed to home price inflation, are also likely to be affected by higher interest rates and diminishing cash flow.
When will the Toronto real estate bubble burst? While pinpointing the exact timing of Toronto’s potential real estate correction remains challenging, signs of deflation may already be underway. The TRREB has its benchmark prices, designed to estimate the value of a typical home in the area without distortion from outliers. In October, the real estate board reported the benchmark at $1,103,600, indicating a 2.1% dip from September’s $1,127,000.
The prospect of a prolonged period of increased interest rates, driven by the Bank of Canada’s cautious stance amid inflation concerns, alongside reduced affordability, restrictions on foreign buyers, and decreased local investor activity due to higher interest rates, suggests the potential for further market deflation.
When will housing prices hit bottom?
Prices are dropping in Toronto, and in Canada as a whole. However, it’s uncertain whether prices will continue to decline or not. The Canada Mortgage and Housing Corporation (CMHC) forecasted home prices to increase in 2024. And according to recent stats from real estate firm Wahl’s 2023 GTA Housing Snapshot Report, underbidding has been rising over the past five months (81% in October). To me, the growth underbidding indicates there are less buyers and lower prices.
Optimists may argue we’ve seen this environment before, with affordability as the ongoing issue. They may contend that the lack of housing supply and the resilience of the housing market will continue to drive up home values. However, certain conditions such as astronomical inflation and rapid interest rate increases have not been seen in decades. This present landscape contains a new set of headlines, setting the stage for potential falling home prices.
While it’s impossible to definitively predict if and when the Toronto real estate market will experience a downturn, it’s evident that skyrocketing prices have created an affordability problem for many.
Simultaneously, though, it disproportionately benefited others, such as property investors. Despite current conditions suggesting diminishing housing demand, including that of investors, policy makers in Canada, including Toronto, must address and moderate this type of demand in the future. Even after interest rates come down.
A plane flies over Miami residential towers in Miami, Florida. (Photo by CHANDAN KHANNA / AFP) … [+] (Photo by CHANDAN KHANNA/AFP via Getty Images)
AFP via Getty Images
Taking out a loan for a real estate investment may seem tougher than ever—especially for those new to the game. In the wake of three bank failures, rising interest rates, and a contraction of credit among lenders, clearly there are additional challenges in today’s market. In early 2023, Silicon Valley Bank collapsed, followed closely by the falling out of Signature Bank and then First Republic Bank, as reported in the Financial Times. In May, the Federal Reserve announced increased rates from 5% to 5.25% in an effort to tame inflation and spur job growth.
That said, debt typically takes up a portion of the capital stack and is often necessary to acquire a property. Once you’ve found a great opportunity, you’ll usually gather two main types of equity, known as preferred equity and common equity (I explained how these work in a previous article). The capital stack also includes layers of debt, which we’ll look at in depth here. These are senior debt and mezzanine debt, and it’s important to both understand what they are and how today’s lending environment could impact your financing activity.
Sourcing Senior Debt
Banks and lending institutions issue this type of debt, which is secured by a mortgage, or a pledge of the property. Senior debt could also be available from insurance companies and CMBS markets. (CMBS stands for commercial mortgage-backed security.) If payments are not made, the lender typically retains the right to take over the place through foreclosure. They can then resell the property to recoup their expected return.
Senior debt takes the bottom of the capital stack, as it has the lowest risk. Lenders will be paid first, before mezzanine debt holders and equity investors. Senior debt also has the lowest opportunity for rewards, as the interest rate will be established and is typically lower than what mezzanine and equity participants will receive.
Sourcing Mezzanine Debt
In the capital stack, mezzanine debt falls into place in the middle, below common and preferred equity, and above senior debt. It is a hybrid lending tool that serves as a bridge between the debt and equity portions. It acts as a secondary loan against the ownership of the property. This type of financing could come from sources such as a family office or another privately negotiated transaction. Mezzanine debt lenders generally expect to receive regular payments at an interest rate that is higher than the senior debt rate. They usually hold the right to convert the debt into an equity interest if the borrower defaults on the loan.
In terms of payments, the mezzanine debt is serviced after the operating expenses and senior debt. For this reason, it carries higher risk in the capital stack than senior debt. However, it also has priority over preferred equity and common equity. As such, it is generally considered safer than preferred equity and common equity. It also has less potential for rewards than the equity portions of the capital stack.
Debt in Today’s Market
During the past year, banks have been tightening their lending policies for all categories of commercial real estate loans, per the Senior Loan Officer Opinion Survey released by the Federal Reserve in April 2023. The most frequent changes included greater spreads of loan rates over banks’ cost of funds, along with a drop in loan-to-value ratios. (Loan-to-value refers to the loan amount divided by the total value of the property).
That said, U.S. banking officials are recognizing these trends and addressing the stresses of the market. In June, top regulators asked lenders to work with commercial real estate owners who are facing such a difficult environment, as reported in Bisnow. Borrowers with good credit standing may be able to make agreements on loan repayments to accommodate their situations.
Given these trends, investors today can expect the need to bring more equity to the table when acquiring properties. The types of financing available may carry more risk as well. Pay attention to collateral, as personal guarantees could cost you if the unexpected happens. For this reason, I always advise making sure you’re not overleveraging your funds as you enter a deal.
When sourcing debt, a good mortgage broker will be able to bring you lending options and help evaluate what’s available to you. We’ll look at this more in-depth in the next article. With the right plan and financing tools in place, you could be on your way to getting long-term returns that outperform the market.
Home prices go up and down according to supply and demand. Very simple. But because homes aren’t commodities like wheat and corn it’s much harder to predict how much supply and demand there actually is.
I’ve been following home prices for 40 years but the sharp rise during the pandemic caught me by surprise. None of the usual economic forces were in play.
Typically, home prices rise faster in a local market because of an economic boom that spurs demand; the oil boom in Houston in the 1970s, the financial boom in New York in the 1980s, the tech boom in Seattle in the 1990s, and more recently the tech surge in San Francisco and the shale-oil boom in Bismarck.
These booms were easy to understand and only affected a few markets. The sub-prime mortgage boom of the mid-2000s was different. A LOT of markets were affected, a lot of private and government actions were involved, and it wasn’t clear exactly WHY home prices were going up so much.
The boom that started in 2021 is again different from anything we’ve seen before. This time ALL local markets in the US are affected; prices rose much faster than they ever have; and the cause was not a surge in demand but a shrinking of supply.
I had thought that during a dangerous pandemic nobody would want to buy or sell a home. I was half right, nobody wanted to sell; but some people desperately wanted to buy.
So here we are. Prices in all local markets are up at least 20 percent and in many markets more than 60 percent. The boom is over now – finally killed by high mortgage rates – but will these higher prices stick?
GLENDALE, CA – (Photo by David McNew/Getty Images)
Getty Images
Expect Falling Prices in 2023
My forecast model, built on the behavior of previous booms, predicts that home prices in 2023 will be up another 7 percent; but I don’t believe it, nor should you. Because the cause of higher prices has disappeared – a lot of people are now willing to sell – because interest rates will stay high, and because the threat of a new recession looms ahead, there are now more sellers than buyers. Nationally, prices are already down from a peak in May-June and will continue to fall.
And because prices rose so quickly in what turned out to be a thin market, they also will come down quickly, maybe VERY quickly if that recession happens. The readjustment of home prices after the 2000s boom took four years or so. Not this time; I expect prices to readjust over a couple of years, at most.
How far can they fall? If a serious recession happens all bets are off, but the normal guideline is local income. Prices will fall back to the level that local income supports. Table A shows how much that would be for ten big markets and ten smaller ones.
Possible Home Price Drop for 2023
Local Market Monitor
In markets with good economic growth the adjustment may not be dramatic. People always want to move to Florida and Texas – and lately Utah and Idaho – so in some markets prices may just go sideways until income catches up. But I think prices will be lower even in these markets.
What does all this mean for real estate participants?
Bankers should tighten loan-to-value ratios for mortgages and should avoid more home equity loans; fortunately for them, high interest rates already limited cash-out refinancing. The rapidity of the boom means there’s not been enough time for banks to get in trouble financing new construction, but some recent home buyers will have problems with their mortgage.
Home builders also have not had enough time to start many projects that depend on higher home prices, but they should sell existing projects sooner rather than later.
Investors and home buyers can now take their time to find the market and property they want and should drive a hard bargain on prices. The whole process of listing a property for sale, then waiting for offers, then cutting the price, then waiting some more, then cutting the price some more takes months – which is why home prices don’t come down very fast; but that also means possible buyers can start looking early in the year without committing themselves until much later. And don’t worry if the first property you like goes for a higher price than you bid, there will be more later and at lower cost.
Expect Modest Rent Increases in 2023
Outrageous rent hikes make the news but the reality for landlords is that rents can only rise as much as tenants can afford. The increase varies from year to year, but over the course of several years average rents only rise as much as average income.
Average rent increased five percent in 2021. The increase was probably more in 2022 as some landlords made up for flat rents during the pandemic, but is likely to be less in 2023 because landlords will otherwise see tenants leave and nobody wants to sit with an empty property very long.
If inflation becomes entrenched this forecast is out the window. But I think inflation, and above all the cost of energy, will continue to moderate in 2023 as the global economy slows, so rent increases will be low.
The importance of modest rent increases in 2023 is that while rental investors will be able to buy properties at lower prices, they still have to balance what they pay against the rents they can expect. Rents don’t automatically rise to match home prices, it’s the other way around; in real estate the tail wags the dog. How much you should pay for a property depends on how much rent you can expect to get; don’t expect too much.
Investors who already bought at high prices will have to change their strategy. Either accept a lower return for a few years or invest more to upgrade to a different rent bracket. There aren’t many renters at the upper end, however, so subdividing into several units may be a better (although more expensive) plan.
Be Cautious in 2023
The turning point in every boom creates both difficulties and opportunities. More than anything, it creates uncertainty. I’m pretty sure home prices will come down, I’m pretty sure interest rates will stay high, I’m pretty sure whatever recession we have will be mild. But every economic time is different, so 2023 is a good time to be cautious.
