In an uncertain economy and a changing real estate market, it pays to listen to experts with finely honed insights. Marketplace wisdom will be necessary in 2023, so the W Report sat down with a few local Windermere leaders to ask what they expect will be the prevailing themes of this year’s real estate market.
Read on to learn their thinking about 2023 home prices, interest rates and strategies for prospective buyers and sellers.
BJ Connolly, co-owner of Windermere Real Estate Central Inc. in Kirkland
We will see an increase of inventory this spring but it will remain a balanced market for the most part. I also see home prices increasing at a very moderate pace in certain areas of King County and remaining neutral in others. I see interest rates hovering around where they currently are for a while, and hopefully falling towards the end of spring.
Buyers will be taking their time to really assess what their needs are. They will have more time to choose what to purchase due to an increase in inventory. Interest rates may have diminished their buying power compared to last year, but they would rather get into the market now to try to beat rising prices with the ability to possibly re-finance to a lower interest rate in a few years.
However, being able to take their time doesn’t mean buyers should be less prepared than they were last year. They’ll need to have their finances all in order and their pre-approvals and/or pre-underwritten letters ready to go to help them stand out.
Sellers will have to price correctly to get the attention of these buyers. They’ll also have to spend time preparing their properties so they really shine in a market with more supply. They also may need to be prepared to offer some closing costs to help buyers offset their financing costs due to higher interest rates. We are seeing inspection contingencies back in contracts, so sellers need to be prepared for possible repairs as well.
Both parties will need to be creative and patient while working together to make their transactions successful.
Laura Smith, co-owner of Windermere Real Estate Co. in Seattle
There will be plenty of opportunity in 2023 for both buyers and sellers. This will especially be the case for those thinking of the long-term. I don’t expect prices to be in a free fall this year, instead experiencing a slower rate of overall appreciation. Normalcy is a healthy thing for both sides in 2023.
Some might be concerned about there being too little demand in the year. I doubt this will be the case, partly because I don’t expect there will be enough supply, even if large swaths of buyers are on the fence. If you remove from the equation any languishing inventory — those homes not market-ready or properly priced, or both — we likely won’t have enough supply to create a true buyer’s market this spring. Ultimately, some markets may look buyer-esque and some may skew toward sellers. It will be a mixed bag.
To maximize their success in the market, buyers will benefit from being patient, realistic and creative. Teaming with a smart real estate broker and a creative lender will be the difference.
It’s great that many lenders are getting more and more tooled up to create solutions for interest rate sensitivity.
A number of lenders are offering 2:1 buy-downs, which help buyers get closer to their desired payment. I know one lender who’s introduced a buy-now-refinance-later plan, which allows buyers to refinance their loan within three years of purchase if rates go down, and they can do this without paying the lender admin fee on the new loan; their appraisal fee would also be significantly reduced for the refi. This type of option is both extremely helpful to buyers and intelligently responsive to the market.
For sellers, they’ll have to be alert to not becoming part of the languishing inventory pool I mentioned earlier. If they are entering the market fresh, they’ll need to think strategically and be flexible. They’ll need to price smart out the gate and get their property in the best condition they can. They needn’t break the bank — there are programs like Windermere Ready that help sellers prepare their homes with no money down — but they should be aware of the condition of comparable listings and do what they can to compete on both price and quality.
Matt Deasy, co-owner of Windermere Real Estate East Inc. on the Eastside
The real estate market will follow the path of interest rates. Buyers and sellers have recently been in a staring contest, where sellers are holding their price and buyers are waiting for prices to drop. Who blinks first will likely be determined by interest rates.
Rates have fallen from their peak, resulting in more activity in early January than we saw in November and December. Lower interest rates are sure to draw more buyers into the market, but they won’t create the buyer demand — or the buying power — that 3% mortgage rates did these past few years.
With regard to price, I anticipate that King County home prices should be relatively flat in 2023.
Sellers need to price their listings right, based on current comparable sold prices. We see that properties in mint condition are getting more activity, so anticipating any needed updates and repairs is a smart move. Seeking the counsel of a knowledgeable real estate broker will make all the difference for a seller wishing to bring their listing to the market priced correctly and in desirable condition.
As for buyers, we see financed buyers successfully using ARMs or interest rate buy-downs. In transactions without competition, buyers are often negotiating for sellers to pay the cost of the buy-down. These buy-downs may be the tool that helps bring buyers and sellers together on price.
Despite the economic and jobs uncertainty in our region, we will definitely see real estate market activity this year. Our brokers’ phones started ringing around January 5th, with buyers and their brokers inquiring on active listings, regardless of time on the market. This is a good sign that there is still demand.