The talk of a housing bubble in the coming year seems to be at a fever pitch as rising mortgage rates continue to slow down an overheated real estate market. Over the past two years, home prices have appreciated at an unsustainable pace causing many to ask: are things just slowing down, or is a crash coming?

To answer this question, there are two things we want to understand. The first is the reality of the shift in today’s housing market. And the second is what experts are saying about home prices in the coming year.

The Reality of the Shift in Today’s Housing Market

The reality is we’re seeing an inflection point in housing supply and demand. According to realtor.com, active listings have increased more than 26% over last year, while showings from the latest ShowingTime Showing Index have decreased almost 17% from last year (see graph below). This is an inflection point for housing because, over the past two years, we’ve seen a massive amount of demand (showings) and not enough homes available for sale for the number of people that wanted to buy. That caused the market frenzy.

Today, supply and demand look very different, and the market is slowing down from the pace we’ve seen. This offers proof of the sudden slowdown so many people are feeling.

What Experts Are Saying About Home Prices in the Coming Year

Right now, most experts are forecasting home price appreciation in 2023, but at a much slower pace than the last two years. The average of the six forecasters below is for national home prices to appreciate by 2.5% in the coming year. Only one of the six is calling for home price depreciation.

When we look at the shift taking place along with what experts are saying, we can conclude the national real estate market is slowing down but is not a bubble getting ready to burst. This isn’t to say that a few overheated markets won’t experience home price depreciation, but there isn’t a case to be made for a national housing bubble.

Bottom Line

The real estate market is slowing down, and that’s causing many to fear we’re in a housing bubble. What we’ve experienced in the housing market over the past two years were historic levels of demand and constrained supply. That led to homes going up in value at a record pace. While some overheated markets may experience price depreciation in the short term, according to experts, the national real estate market will appreciate in the coming year.

If you’ve been thinking of buying a home, you may have been watching what’s happened with mortgage rates over the past year. It’s true they’ve risen dramatically, but where will they go from here, especially as the market continues to slow?

As you think about your homeownership goals and decide if now’s the time to make your move, the best place to turn to for that information is the professionals. Here’s a summary of the latest mortgage rate forecasts from housing market experts.

Experts Project Mortgage Rates Will Stabilize

While mortgage rates continue to fluctuate due to ongoing inflationary pressures and economic uncertainty, experts project they’ll start to stabilize in the months ahead. According to the latest projections, mortgage rates are expected to hover in the low to mid 5% range initially, and then potentially dip into the high 4% range by later next year (see chart below):

That could bring you some welcome relief. So far this year, mortgage rates have climbed over two percentage points due to the Federal Reserve’s response to inflation, and that’s made it more expensive to buy a home. And wondering if the rise in rates will continue is keeping some prospective buyers on the sidelines.

But now that experts say mortgage rates should stabilize, this gives you a bit more certainty about what they think the future holds, and that may help you feel more confident about your decision to buy a home.

Bottom Line

Whether you’re looking to buy your first home, move up to a larger home, or even downsize, you need to know what’s happening in the housing market so you can make the most informed decision possible. Let’s connect to discuss your goals and determine the best plan for your move.

If you’re a homeowner or are planning to become one soon, you’re probably looking for clear information about today’s housing market. And if you’ve turned to the news or even just read headlines recently, you might feel like you’re left with more questions than answers. The best way to make sure you get what you need is to work with an expert.

Why You Want To Lean on a Trusted Professional

With any big milestone in life, it’s wise to seek advice from people who are experts in their field. While you likely want that advice to be perfect, perfect simply isn’t possible. But professionals have the knowledge and experience to be able to provide you with the best advice for your situation.

For example, let’s say you need an attorney, so you seek out an expert in the type of law required for your case. They won’t immediately tell you how the case is going to end or how the judge or jury will rule. But what a good attorney can do is discuss the most effective strategies based on their experience and help you put a plan together. They’ll even use their knowledge to work with you to adjust as new information becomes available.

Similarly, the job of a trusted real estate professional is to give you the best advice they can. Just like you can’t find a lawyer to give you perfect advice, you won’t find a real estate professional who can either. That’s because it’s impossible to know exactly what’s going to happen throughout your transaction. But an expert real estate advisor knows market trends and the ins and outs of the homebuying and selling processes.

They’ll use that knowledge to explain both the national headlines and what’s happening in your local area. That way, you have the best of both worlds and can feel confident in your decision to buy or sell. Freddie Mac explains why having an expert on your side is so essential:

“The success of your homebuying journey largely depends on the company you keep. . . . Be sure to select experienced, trusted professionals who will help you make informed decisions and avoid any pitfalls.”

With their expertise, a real estate advisor can anticipate what could happen next and work with you to put together a solid plan. Then, they’ll guide you through the process, helping you make decisions along the way. That’s the very definition of getting the best – not perfect – advice. And that’s the power of working with a real estate advisor.

Bottom Line

To get expert advice when you buy or sell a home this year, let’s connect today.

Whether or not you owned a home in 2008, you likely remember the housing crash that took place back then. And news about an economic slowdown happening today may bring all those concerns back to the surface. While those feelings are understandable, data can help reassure you the situation today is nothing like it was in 2008.

One of the key reasons why the market won’t crash this time is the current undersupply of inventory. Housing supply comes from three key places:

• Current homeowners putting their homes up for sale
• Newly built homes coming onto the market
• Distressed properties (short sales or foreclosures)

For the market to crash, you’d have to make a case for an oversupply of inventory headed to the market, and the numbers just don’t support that. So, here’s a deeper look at where inventory is coming from today to help prove why the housing market isn’t headed for a crash.

Current Homeowners Putting Their Homes Up for Sale

Even though housing supply is increasing this year, there’s still a limited number of existing homes available. The graph below helps illustrate this point. Based on the latest weekly data, inventory is up 27.8% compared to the same week last year (shown in blue). But compared to the same week in 2019 (shown in the larger red bar), it’s still down by 42.6%.

So, what does this mean? Inventory is still historically low. There simply aren’t enough homes on the market to cause prices to crash. There would need to be a flood of people getting ready to sell their houses in order to tip the scales toward a buyers’ market. And that level of activity simply isn’t there.

Newly Built Homes Coming onto the Market

There’s also a lot of talk about what’s happening with newly built homes today, and that may make you wonder if we’re overbuilding. But home builders are actually slowing down their production right now. Ali Wolf, Chief Economist at Zonda, notes:

“It has become a very competitive market for builders where they are trying to offload any standing inventory.”

To avoid repeating the overbuilding that happened leading up to the housing crisis, builders are reacting to higher mortgage rates and softening buyer demand by slowing down their work. It’s a sign they’re being intentional about not overbuilding homes like they did during the bubble.

And according to the latest data from the U.S. Census, at today’s current pace, we’re headed to build a seasonally adjusted annual rate of about 1.4 million homes this year. While this will add more inventory to the market, it’s not on pace to create an oversupply because builders today are more cautious than the last time when they built more homes than the market could absorb.

Distressed Properties (Short Sales or Foreclosures)

The last place inventory can come from is distressed properties, including short sales and foreclosures. Back in the housing crisis, there was a flood of foreclosures due to lending standards that allowed many people to secure a home loan they couldn’t truly afford. Today, lending standards are much tighter, resulting in more qualified buyers and far fewer foreclosures. The graph below uses data from ATTOM Data Solutions on properties with foreclosure filings to help paint the picture of how things have changed since the crash:

This graph shows how in the time around the housing crash there were over one million foreclosure filings per year. As lending standards tightened since then, the activity started to decline. And in 2020 and 2021, the forbearance program was a further aid to help prevent a repeat of the wave of foreclosures we saw back around 2008.

That program was a game changer, giving homeowners options for things like loan deferrals and modifications they didn’t have before. And data on the success of that program shows four out of every five homeowners coming out of forbearance are either paid in full or have worked out a repayment plan to avoid foreclosure. These are a few of the biggest reasons there won’t be a wave of foreclosures coming to the market.

Bottom Line

Although housing supply is growing this year, the market certainly isn’t anywhere near the inventory levels that would cause prices to drop significantly. That’s why inventory tells us the housing market won’t crash.

The intersection of North Second Street, Germantown Avenue, and Girard Avenue was once a deserted area of mostly vacant lots, including a large lot where the Schmidt’s Brewery used to be located. Developer Tower Development started building the Piazza development of mostly apartment buildings surrounding a large open piazza, similar to piazzas in Europe, many years ago. Across Germantown Avenue, a large vacant lot remained for many years, but now developers Post Brothers are developing this remaining land at the intersection of Northern Liberties, Fishtown, and South Kensington into a massive new neighborhood of luxury apartment buildings with a unique set of upscale amenities, known as Piazza Alta.

Piazza Alta, designed by BKV Group, will be made up of several connected buildings, including a 16-story high-rise and two 12-story high-rises, with 1,200 rental units, ranging from studios to four-bedroom units. Most units will have two entry closets and Electrolux washers and dryers. The kitchens have three color schemes to choose from, including “Sleek” (dark), “Scandinavian” (silvery), and “Timeless” (gold). The standard kitchen appliances are GE appliances, but deluxe upgraded kitchen appliances include Bertizoni oven/ranges, Bromberg dishwashers and microwaves, and Franke kitchen sinks with Hansgrohe faucets. The bathrooms have advanced shower heads, as well as, Gerber commodes and Gerber faucets.

The apartment complex has many luxury amenities, including a co-working lounge, a coffee bar, a BYOB bar with a patio, a golf simulator, a 24/7 concierge, a package room, and Tide drycleaners. The fitness center is very large and includes a ski simulator, an XForce machine, Peloton, and Hydrow rowing. There is a spa with hydro massage chairs, a sauna and steamroom, and a Glam room. The pool area, known as Aqua Foro pool club and designed by DIGSAU, is connected to the buildings by a skybridge and has some of the most extensive amenities. The large pool will have cabanas (including one with a fire pit), deck chairs, a splash pad, and ping-pong tables all in the pool. The pool deck will have additional cabanas, deck chairs, fire pits and tables, an outdoor kitchen, billiards and foosball. There will be courtyards, with artwork and fountains, within the complex and Germantown Avenue and Hancock Street will have retail space, which will include at least one restaurant.

The Piazza Alta development will have a major impact on the Northern Liberties, Fishtown, and South Kensington neighborhoods, bringing such a large amount of new luxury housing and amenities to a rapidly developing part of Philadelphia. This development also sets a new precedent for taller buildings in these neighborhoods, especially along the busy Market/Frankford line.

Written by Gabriel Gottlieb