Real estate industry predictions for 2023

by Timothy Inklebarger

Featuring the perspectives of:

Mike Balzotti, Director of Education, Russ Lyon Sotheby’s International Real Estate

Tim Brigham, Union Home Loans

Liz Brooks, Executive Vice President of Sales and Marketing, Belgravia Group

Jeremy Collett, Executive Director of Capital Markets, Guaranteed Rate

Greg Hague, Founder, 72Sold

Mo Hamideh, Branch Manager, Nations Lending

Lizy Hoeffer, CrossCountry Mortgage

Robert Joffe, Founder and Associate Broker, The Joffe Group at Launch Real Estate

Slava Kosta, Vice President of Recruitment and Managing Broker, DeLex Realty

Heath Melton, President, The Howard Hughes Corporation

Todd Menard, Chief Operating Officer, West USA Realty

Monica Monson, Founder and CEO, The Noble Agency

Wendy Walker, Managing Director – Scottsdale, The Agency

What do you expect for the overall housing market in 2023? 

Mike Balzotti: NAR Chief Economist Lawrence Yun predicts home prices will go up 1% next year. But it will vary by area, and some metros could see slight decreases.

Our best resource for local forecasting is a “bank grade” program called Collateral Analytics. Its five-year forecast suggests more market softening we’re experiencing in Q4 of 2022 to continue into Q1 of 2023 followed by a modest recovery and relative stability. Their forecast uses the CBSA, or Core Based Statistical Area (demographic and economic regional data) weighted heavily to affordability.

Affordability is driven in no small part by interest rates. So mortgage rates are the big unknown variable.

Tim Brigham: I think that we will be strong and healthy in 2023. We have a lot of shifting but with the 10-year swings we have seen historically, it will be a great time to own real estate.

Liz Brooks: While higher interest rates and a fear of economic uncertainty will continue to produce significant market headwinds, there are still meaningful demand drivers and supply constraints that will lead to deal activity. Millennials have surpassed baby boomers as the nations largest living adult generation, and they are entering their prime spending years, getting married and starting families. As rental rates have climbed steadily for years, many millennials are now preparing to purchase homes. And as even more existing homeowners stay put, unwilling to give up their ultra-low mortgage rates, there are fewer homes for sale; supply is likely to remain constrained for the foreseeable future.

Our job as real estate professionals is to reinforce to buyers the financial and emotional benefits of owning a home. This requires us to sharpen our knowledge and skills to find creative solutions to help our clients achieve their homeownership goals. Ultimately, our role is to help sellers and buyers achieve their goals during this challenging time.

We need to understand financing options as well as our mortgage partners do, because we are going to see a return of personalizing mortgage programs to each buyers situation. For instance, first-time buyers tend to stay in their homes fewer years than move-up buyers. Therefore, it may not make sense for them to pay a premium for a 30-year fixed-rate mortgage when a 5- or 7-year ARM will save them thousands of dollars each year.

Jeremy Collett: We can forecast, but nothing is certain. The Mortgage Bankers Association (MBA) believes that housing prices will likely level off, but the higher-rate environment will mean that fewer homes will sell or refinance in 2023.

By buying low in a cooled market, once prices heat up again, the steady build in home equity offers many advantages: dropping PMI (if applicable), taking out a HELOC to invest in home improvements or refinancing with more favorable terms.

No matter what, I think we will see a return to seasonality, with a focus on home sales in spring and summer when people are more inclined to move.

Greg Hague: Home inventory will remain low in 2023 because many homeowners won’t want to “trade up” from a 3% interest rate to 7%-8%. So even though higher interest rates will keep buyer demand low, home values should stabilize, avoiding the “crash” in values we experienced in 2008.

Mo Hamideh: That will depend heavily on how steep the recession will be. From what I read, we should have a strong year in 2023 as rates are expected to come down. Historically mortgage rates go down while real estate prices go up when inflation starts declining.

Lizy Hoeffer: I think real estate is going to be balanced with sellers and buyers with a significantly smaller percentage of transactions due to higher mortgage rates.

Robert Joffe: I predict that the high-end over $2 million market continues to stay strong with the good homes selling at high prices. I predict the lower end under $2 million market will take some hits because that price range is more interest-rate sensitive.

Slava Kosta: The real estate market keeps evolving and changing. On a general U.S. macro level, I expect it to continue to modify into a more balanced market. We have seen a steady real estate market correction projector across the country. On a micro level for the Phoenix metropolitan area, we expect a busy spring with lots of sales. The biggest factor is the overall growth and expansion and of course the number of jobs that are moving to the Valley of the Sun.

Todd Menard: 20,000-plus active inventory (Greater Phoenix Metro); 5,000-plus pending contracts at any point in time; 2,200-plus new listings added to market each week; 4%-5% annual appreciation of existing single-family detached homes; and 4.55-6.5% mortgage interest rates (not APR).

Monica Monson: I expect that the housing market will continue to normalize overall. Rates will continue to jump around and while inventory has grown in the broad market, it has remained relatively low in the luxury market.

Wendy Walker: We remain quite optimistic here in the Phoenix market for 2023. With the increased inventory, we will now have properties to sell … and also will see an influx of visitors for events including the Barrett Jackson car auction, the Phoenix Open, Super Bowl and Spring Training traffic.

What growth, if any, do you expect for your company next year? 

Hamideh: We have been on a growth and hiring streak for the last few years, including the last few months. When many lenders/bankers/brokers are laying off employees, we are expanding and growing our footprint. We believe next year will be a great year for my team and companywide.

Joffe: I think you will see a thinning out of the number of Realtors because it’s going to be harder to buy and sell homes. Experienced agents like myself and those at Launch Real Estate should fare better than most.

Collett: The housing market, much like the economy, is cyclical. It never heads in one direction for too long before adjusting. When things slow, opportunities arise to prepare for the next comeback. That way, when the tide does turn — and it will — we are fully prepared to ride the next wave instead of reacting to it in the moment. Thats why we continue to invest in technology to provide the best customer experience possible. We have a strong business plan in place for 2023, which is focused on fully supporting our loan officers. We offer a unique environment to set them up for success, including:

  • The CEO Mindset™: When markets cool, winners with the right mindset emerge. The GR philosophy allows loan officers to be the CEO of their business. They have a team they can delegate marketing and administrative tasks to so they can focus on growth.
  • FastTrack: While banks can take weeks and months to close, our FastTrack program can get customers a CTC (clear to close) as fast as 24 hours and to the closing table as fast as 10 days.
  • PowerBid Approval: This helps customers compete with all-cash offers. This fully underwritten credit approval shows sellers that the buyer is a qualified loan candidate and can close at the same speed as an all-cash offer.
  • Pricing flexibility to win: Guaranteed Rates loan officers control their pricing and offer the best array of products to customers, such as Lock ‘N’ Roll, which lets buyers lock in today’s mortgage rate for 90 days while they house shop with no commitment to buy.
  • Dynamic Marketing. We have the best-practice model to constantly stay in front of your potential customer network.

Hague: 72SOLD will continue to thrive because we developed a program that home sellers can clearly see (proven metrics) that they not only sell in eight days or less, but they walk away with thousands of dollars more than if they sold the traditional way. 

Balzotti: The Russ Lyon Sotheby’s International Realty brand has an inherent attractor-factor — since it dominates the luxury sector by about any metric, it attracts both sellers, who want that blue sign in their yard, and agents, who aspire to work in the higher end markets.

That said, we’re always quick to say that as a brand (as opposed to an affiliation) we deliver the same caliber of service/standard of care at all price points.

Brigham: We are growing consistently, but we just recently increased over 25% in our sales force. We have seen people flocking to our company for our culture and abilities.

Menard: We are a 100% commission business model. Our agents earn 100% less a flat monthly and transaction fee. Our model has weathered previous market storms since our business philosophy is that the agent is our customer. If we provide them with the knowledge, tools, services, education, technology and broker support, we believe this will put them in a position to provide better services and more appropriate advice to their sellers and buyers. This positions these customers to make better decisions with this knowledge. When the licensee is better prepared the consumer receives better representation. Ultimately the company receives added value and goodwill. 

Agent count should increase. Closing units should be similar to 2022, however we anticipate they could increase by 15%-20% if the rates drop to 4.5%-5.5%, combining higher inventory levels with lower finance costs.

Monson: We expect our company to grow in size over the next year. Skilled advisors are seeking a boutique experience and companies that provide exceptional one-on-one support, strategic planning as well as agency-quality creative. They want collaboration, mentorship and a partner in their business. We are focused on helping full-time advisors maximize their potential.

Hoeffer: My goal is to gain market share amongst agents and to set my team up for refinances. I do not expect to grow next year.

Kosta: DeLex Realty expects to have a phenomenal 2023. We expect to grow by hundreds of agents. Also, our goal is to expand our footprint geographically, including outside of the state of Arizona. Why? Well, it is rather simple. People have to live somewhere, and they need an expert to guide them through the home-buying process, a process not as simple as some think. 

Here at DeLex Realty we have built a brokerage that is highly attractive to Realtors. Our model is formed to thrive in any market conditions. With low fees, extremely strong broker support, top-notch marketing and technology, classes, coaching, mentoring etc., we are a brokerage positioned for the next decade and decades to come.

What will be the biggest challenges and opportunities for agents in 2023? 

Joffe: Higher interest rates and a fluctuating stock market.

Monson: One of the biggest challenges advisors will face is mindset. Real estate is not an easy business, despite its popularity. It takes hard work, commitment and a mindset that is focused on action, positivity and perseverance. Those who can block out the noise, stay focused and put the effort in will be the ones who find the most success.

Walker: Certainly the interest rates will continue to pose a problem for certain segments of the market

Kosta: As usual, the biggest challenge is getting adjusted to anything new. With two years of an unprecedentedly strong sellers’ market, the main challenge will fall on getting used to “work” listings by advertising, marketing and being on top of different options and ideas to sell the home in a timely fashion while meeting sellers’ expectations. Yes, we will have to educate and communicate with sellers in terms of how long it may take to sell their home, their price points, high and low and being realistic on their overall outlook and goals. However, buyers are out there looking, and sellers can do very well if they set their expectations realistically.

Menard: Overcoming consumer buyer fears of inflation/recession/interest and the negative syndicated reporting of national numbers. These do not match Arizona. Arizona is expected to remain the top GDP state for the next five years (Forbes). Commercial/industrial construction along the I-60 and Loop303 corridors are expected to drive job growth and increased incomes. The stigmatization caused by inflation and high interest rates will last into 2023. Many will look at the latter parts of 2022 and early 2023 saying. “I wish I had bought a home back then.” This will be caused by home prices going up, population increases near 130,000 in 2023 and interest rates remaining higher.

Balzotti: Agents have gotten used to an artificially low interest rate environment since the Fed stepped in with quantitative easing to stimulate the economy after the 2008 crash.

Current rates are not that high historically – currently about where they were before the 2008 crash. It’s the unprecedented sudden rise in mortgage rates this year that has agents needing to quickly adapt to interest rate moderating strategies like buy-downs and adjustable-rate mortgages.

We’ve mentioned the affordability factor — it’s actually a one-two punch affecting both buyers and sellers. Rates going from around 3% to pushing 7% raises the effective cost of purchase by 40% (10% increase in cost for every 1% increase in mortgage rates). Add to that a broad brush 25% year-over-year increase in appreciation and 2022 mid-year homes were suddenly up a whopping 65% year-over-year — a major factor in squelching demand!

Not only are buyers impacted, but potential sellers are wary of giving up their low interest rate. This factor impacts the supply side. Skillfully managing the consequences of this one-two punch of rates and appreciation will be where both the challenge and opportunities will be for agents in 2023.

What can agents do to succeed in 2023?

Monson: Find a mentor and focus on consistency. Advisors often feel like they are alone even though they work with large or small companies. Find one or two mentors who can offer advice, guidance and support as you grow your business. Listen intently as many have been through the ups and downs of the real estate market and can share tips on how to position for success. Consistency is a non-negotiable. Whether being consistent with a daily routine, staying in front of your clients or marketing projects, those who maintain it will see positive results.

Balzotti: To succeed in 2023 agents will need to continue to adapt to the consequences of the shifting interest rate landscape e.g. seller concessions; adjustable rate mortgages; and, in short, reconciling that moving forward may mean giving up some of those recent massive appreciation gains.

Kosta: WORK, WORK, WORK!!! There is lots of real estate to sell. Less bidding wars, more product for the buyers, more seller concessions, higher commissions. 

High rent prices will motivate people to buy. It is definitely going to be a more favorable real estate climate for buyers versus 2022. 

Agents should double down on marketing and educate people about the benefits of real estate ownership. I always tell agents that it is of crucial importance to invest in a robust website and CRM platform. If the crazy busy 2022 kept you away from focusing on your tools, it is time to not just sharpen them but to add more. Here at DeLex Realty we thrive to offer our agents the best available technology along with top-of-the-line marketing options.

Menard: The biggest mistakes is for brokerages to teach Realtors they need to buy leads rather than organically creating business among their own sphere of influence. National benchmarks for lead generation indicate that every person comes in contact with five people per year who are ready, willing and able to sell/buy real estate. The question is whether the person feels comfortable that the agent will deliver excellent representation. If they feel confident the consumer will refer the licensee to others, namely these five contacts annually.

The average agent only needs to sell the number of properties which will equate to their income goals. Not every agent needs nor wants to be a super producer or run a team of agents. They can work a reasonably comfortable business model and make the income necessary to afford life, children, college and not be home poor. They can always expand if desired. Agents need to cultivate lasting relationships, and they need to be concerned about their personal skill development. The more they focus on their personal skill, the better representation they provide. The better they make friends and influence people, the more organic opportunities will arise.

Is the work-from-home trend still changing the way people are shopping for homes? 

Walker: Not as strongly as it has been in the last two years, from people fleeing densely populated areas. Outdoor amenities are key. This is the time of year our weather is a major factor in our relocation and second home population. 

Menard: The work-from-home trend saves fuel expenses, however it doesn’t change the market. Certainly during COVID people were trapped at home. So I anticipate they had more time to surf the internet. Real Estate sites like Zillow.com and Realtor.com are available for consumers to start their search of knowledge earlier and individually well prior to engaging the services of a Realtor. This means they become more educated than in years past about pricing, and what’s available for the amount they are desiring/willing to spend. When they are ready to engage with a Realtor, today they are ready to make a decision and submit an offer.

Monson: I believe it will always be a factor for buyers. While people are starting to go back to in-office work, we are still seeing hybrid models that allow the flexibility of working from home part-time where a quiet space is needed. Oftentimes we see these spaces being used as flex rooms for work and play.

Joffe: I think people are used to that, so I don’t feel work from home is an issue at all.

Kosta: Not so much in the Phoenix metropolitan area. We definitely changed, however we live in a rather unique zone. Phoenix has always been more suburban. Therefore, we didn’t see the level of change some other metropolitan areas have.

What does the landscape of your company look like post-COVID? (Are agents coming back to the office? 

Joffe: Agents are used to working from home, and I have no issue with that at all.

Walker: Our company is definitely focusing on technology and reach. We are seeing many more agents in the workplace and using our strong collaborative environment and landscape globally to continue to grow and strengthen our market activity

Menard: Technology: West USA Realty has been providing more tech than the average brokerage for decades. COVID did not introduce new technology, however it forced many to use technology they were not using prior. Zoom is a great example. COVID brought back the art of having a conversation over the phone. CRMs do a great job of automating the document/notice/solicitation process; they do not create nor foster true relationships. That is done in person face-to-face, or at least one-on-one over time. COVID allowed people to slow their roll and made them more available in many aspects of business and life. 

Today companies continue to utilize these platforms as a new channel to communicate with staff, licensees and consumers. However, it’s a people business, and consumers are not yet in acceptance with buying a home over the internet without having seen it. 

Work from home: Real estate was announced as an essential service during COVID so for many our day-to-day routines remained unaltered. However, based on CDC recommendations, corporations had responsibilities to their staff to have everyone tested regularly and alert them if someone tested positive. Our corporate offices allowed the staff to decide if they wanted to work from home or remain at the office level. Due to technology like Zoom, many companies stayed in communication with their staff/licensees using this tech weekly to remain in contact with work-from-home staff.

Kosta: Agents love flexibility, and that is why the idea of a virtual office is so successful. We are a high-tech company and make it easy for our Realtors (even though we have multiple offices across the state). Most agents do not have the need to come to the office. We still have folks that chose to rent an office and lots of agents love the in-person meetings and activities. We had done fantastically in that regard. Our DeLex Realty Luxury meetings in person have been a tremendous success.

Balzotti: Russ Lyon Sotheby’s International Realty takes pride in having the international vantage point manifest locally in a third-generation family-run organization, a “community” where there’s a palpable spirit of cooperation.

A critical component to that “community” is a strong commitment to “the office” — where weekly sales meetings are live and coming into the office is strongly encouraged.

Monson: Our advisors are now coming into the office more. They want the synergy of being around like-minded peers who are stimulating and collaborative. The energy in the room is contagious and we are even hosting our first office yoga class with one of our advisors who is a trained yoga instructor. It has been great for overall morale. 

During the pandemic, Phoenix saw a large number of homebuyers coming in from other, more expensive markets such as Seattle, San Francisco and Los Angeles. Do you expect to see a steady flow of buyers moving to the Phoenix area in 2023? Why or why not? 

Kosta: Yes, I do!!! People will continue migrating to the Greater Phoenix area. Why? For so many important reasons — affordability, climate, high quality of lifestyle, vacation destinations

and most of all JOBS! From the Northwest to the Southeast, thousands of jobs are coming to the Phoenix Metro area.

In addition, people associate Arizona with scorching desert heat, while we have breathtaking mountain areas with amazing ski resorts. From sunshine to refreshing forests and yet close to the beach, Arizona is perfectly located offering a standard of life we all desire.

Balzotti: There is every reason to believe the flow of homebuyers coming in from other, more expensive markets such as California will continue. This is evidenced in the luxury sector transactions doubling and tripling over the past two-plus post-lockdown years.

Walker: California and Chicago have always been major markets for our location. With our seasonal market becoming more of the norm, we will continue to see an influx from those markets due to taxes, price point, weather and overall lifestyle.

Menard: Yes. We anticipate Arizona’s population to increase similar to 2022 and possibly about 10,000 more. Arizona is a resort destination. The weather is what drives people to vacation here. They will continue to come. Arizona may be feeling a higher increase in goods since we have been one of the most affordable states for so many years. If prices increase similarly across the country, then the same should remain true. The same things have always attracted people to move here: weather, jobs (including construction trades/bio-tech professionals), affordability, recreation, entertainment, medical availability, etc.

Joffe: Arizona is a very desirable place to live, and I think people moving in from other areas will continue.

Which Phoenix neighborhoods or suburbs are on the rise and have the brightest housing outlook in 2023?

Menard: Neighborhoods that are within a reasonable drive (workforce housing) from business centers. North of Vistancia (NW Peoria) has 5,500 new homes currently under development. Loop 303 in Peoria, Surprise, Goodyear, Buckeye; along Superstition Freeway Gilbert/South Mesa. Casa Grande, as the electric vehicle plant, Speedway, and other major businesses begin hiring.

Kosta: Of course, there is something to be said about anything located in central areas, which normally keeps high levels of demand. Scottsdale, Arcadia, Central and Downtown Phoenix, Paradise Valley always stand out. Lately some of the hottest areas have been ZIP codes close to central Phoenix. Chandler and Gilbert are hugely attractive as well.

With the 2023 Super Bowl happening here in the Valley, along with other big annual events, our town is once again fully sold out from a rental perspective. A lot of those renters come back for that prime weather and great fun and most of them become homeowners.

Most definitely all eyes are on the Northwest Valley due to the semiconductor plant. Expansion and growth have always been a big part of the Greater Phoenix Area. The Southwest area is about to see the 37,000-acre master planned community “city of the future” — Douglas Ranch. Southeast Valley is a huge corporate hub bringing high-level jobs, from IT to medical. Prescott will continue to attract buyers from all over the country for its mild climate.

On a national level the housing market is vulnerable to rising mortgage rates and affordability. Here in Arizona, we are affected by the same factors. However, we have some important components that play a crucial role in the local real estate market such as world class lifestyle and variety of high paying jobs. Even though we are already experiencing the correction, we all are headed to 2023 optimistic and prepared to tackle a busy first half of the year. 

Balzotti: The luxury neighborhoods / planned golf communities like Desert Mountain; Silverleaf; etc. have been on fire as ‘money moves to the Valley’. We believe this trend will continue.

Do you think any segments of the residential market will be better in 2023? (new construction, rural, luxury, etc.)

Walker: We are still falling incredibly behind on new home products here in the Phoenix market, and the cash luxury buyers remain strong, migrating from cold climates and higher tax areas such as San Francisco Los Angeles, Chicago and Seattle.

Monson: Two areas of the residential real estate market that may continue growth are the luxury segment and new construction. With low inventory in the luxury market and the lag in available new construction, both will continue to be desirable options for buyers relocating to the Valley or moving locally.

Hague: The luxury home market will outperform other segments because for-sale inventory will remain low, and buyers often pay cash, so they aren’t as affected by higher interest rates. 

Menard: The greater than $500,000 active MLS category is expected to reach 60% of the entire ARMLS active. This price category includes first-time homebuyers and workforce housing so increasing the number of available homes for FT homebuyers and workforce housing is imperative to a proper smart growth plan.

New construction will continue to grow albeit at a slower pace for new home starts. This will continue similar to prior cycles until the equilibrium point of rooftops to population.

Balzotti: The single-family building permit counts have collapsed, with only 1,149 being issued in October 2022 for Maricopa and Pinal counties. This is the lowest monthly total since February 2015. It is also down 53% from October 2021 (sourced from the Cromford Report). Fewer new homes will ultimately put upward pressure on new home prices, assuming interest rates don’t continue to rise, mitigating demand.

The luxury sector has a distinct advantage locally for two reasons — the aforementioned influx of cash buyers with those California equities and relative immunity to interest rate hikes. All bets are off however, if the recession deepens, e.g. if the stock market takes major losses.

Collett: Its hard to predict, and it may vary by market. Remote workplaces have allowed many homebuyers to explore non-urban communities, including smaller towns and even more remote areas. Rising housing demand in Montana and Wyoming is proof of that. Both new and luxury construction will likely remain strong in areas with recession-proof industries. As supply increases and demand wanes, we could see many cities enter buyer’s markets.

The affordable housing market will see some growth with the recent pricing changes instituted by Fannie Mae and Freddie Mac. With home equity so high after the home price increases of the last two-plus years, HELOCs and home equity loans should be popular. Looking at the top end, jumbo and non-qualifying loans, particularly those for real estate investors like debt service coverage ratio programs, will likely continue to grow.

Joffe: The luxury market will stay strong since it’s not as interest-rate sensitive.

Kosta: We will know next year, haha. With that said, I believe the mid-ranged homes will do better. Especially mid-ranged homes in central locations. To elaborate, it is my opinion all segments of the residential real estate market will have similar experiences. From luxury to track homes in rural areas. 

For instance, we will see a lot more move-in ready new construction homes along with more incentives from builders. New constructions have been on the rise trying to catch up with the high demand for housing. That trend was equally strong across the board, from luxury homes to communities in rural areas such as Florence as an example. 

The luxury market at large had an incredible 2022. We saw bidding wars with hundreds of thousands over asking price. Hey, even a million over asking — mind-blowing! Now that has changed as the luxury market is also headed to a correction. Strong demand is still in place, and we will see good numbers. However, buyers have more options and more leverage. 

I also think 2023 will definitely be a better time for first-time homebuyers versus 2022. Which means more sales in the lower to medium price range homes, from resale to new construction.

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