Real Estate Market
As 2022 draws to a close, industry leaders are forecasting a real estate market slowdown in 2023 driven by inflation and escalating interest rates. More than a few of you are already feeling the effects in the marketplace.
As business owners, it’s a good time to take a hard look at the data and understand how those numbers will impact your market share, remembering that not every regional market will be impacted equally.
A wise title insurance executive once said that it’s not enough to look at the numbers each week. You must take appropriate action within your company to hedge your bets against those numbers.
So, let’s take a look at what the industry leaders are telling us and consider what actions you may want to consider as you head into 2023.
By the Numbers
Interest Rates: The U.S. weekly average 30-year fixed-rate mortgage was 6.94% in the week of October 20, up 3.85 percentage points from a year ago according to Freddie Mac’s Primary Mortgage Market Survey.
Reality Check: In 1980 and 1981, interest rates averaged 16% and 18%, respectively. While buyers have become accustomed to sub-5% interest rates over the past decade, we are nowhere near the dire territory of the infamous ‘80s.
Employment: Jobs increased by 261,000 in October, according to the Nov. 4 jobs report from the U.S. Bureau of Labor Statistics, with the unemployment rate reported at 3.7%.
Reality Check: While the job market remains strong, the Mortgage Bankers Association is predicting unemployment will creep back up to 5.5% in 2023, and then moderate back into the 4%+ range in 2024. While rising unemployment will impact home buying, it will be far more modest compared to the dramatic rise to 10% during the Great Recession.
Inflation: Inflation rose 8.2% over a year ago in September, and although that is expected to moderate slightly through the end of the year, probably not as fast as the Federal Reserve would like so we can expect yet another bump in interest rates in December.
Reality Check: While business owners have to keep an eye on inflation, most industry pundits are predicting inflation will abate. Most industry organizations are predicting a modest recession over the next year to 18 months, followed by a slow recovery.
What the Numbers Tell Us
The real estate industry will contract for the foreseeable future, but there will be business out there and deals to be made. Again, MBA is still forecasting over $2 trillion in mortgage origination volume for 2023. There will be opportunity for those delivering the best service and maximizing their efficiencies.
Action Plan for 2023
Time to take stock of the potential business in your market and prepare your team for managing through the challenges that are ahead.
Remembering that every market will be impacted differently in a downturn, it’s time to take a hard look at the potential in your market for 2023. Now is the time to assess what properties are moving, and which ones are languishing, and consider diversifying your market mix to take advantage of where the market is strongest.
The Federal Reserve reported in its Oct. 19 Beige Book release that while rising mortgage rates and elevated house prices further weakened single-family starts and sales, apartment leasing and rents were on the increase. Perhaps it’s time to cultivate some investor clients who are buying and selling properties to be used for rentals, or consider other small commercial property opportunities, land sales or specialty sales such as manufactured housing.
A strong sales and marketing effort is going to be crucial in 2023 to keep your game strong.
Time to take a look at internal processes and staffing to prepare for leaner times.
If you do have to cut down on support staff, you need to figure out how to make sure your more experienced staff aren’t being burdened with mundane tasks. More than ever, you will need them to focus on the more complicated tasks of the title and escrow processes and on excellent communication with your clients.
At Alanna.ai, we can be the extra support staff you need for 2023. We take on many tasks for your staff including opening new orders in your title software, answering client questions 24/7, creating buyer and seller net sheets and closing costs estimates, proactively sending text messages to all parties to the transaction, and taking on sales and marketing efforts seamlessly.
Call us today to see how we can become one the most important building blocks in your 2023 business plan.