January 13, 2023

What’s Next? - Issue 343

We’re tip toe-ing into 2023 like everyone else.

Anticipating, a little bit apprehensive, and not quite sure what’s in store for us.

It’s a weird feeling because I’m normally very confident about the direction of the market. I have been through enough challenging and difficult markets over the past 35 years that I can almost say I've seen it all.

However, that’s a claim I’ll never make.

The 2023 market, in my opinion, is going to be a transition market. Here’s what I mean by that:

Inflation, while drifting back down, is still well above the targeted 2%. That means for the time, interest rates will remain above the long term average as the central bank uses its primary tool (interest rates) to wrestle inflation back into line.

The economy, and in particular the job market, are the unknown factors in that a record amount of new jobs were created in the past quarter, which certainly won’t be taking any pressure off the inflation fight. Add in record numbers of new immigrants (most of whom are young, highly skilled, and have the resources to become homeowners sooner rather than later) and you can see that all the indicators are not pointing in the same direction.

A pessimist (and you don’t have to look far to find them) will be calling for a massive pullback in the Real Estate market because of high interest rates and elevated real estate prices which should kill the demand for housing. I’m not buying that argument.

What do I see? A relatively flat market.

My logic recognizes that the higher interest rates and still somewhat elevated real estate values will have a dampening effect on the market. What I’m also recognizing is that the market has grown. Our population and location should mean that demand will remain relatively strong - and we still haven’t considered the supply side of the housing market. Factor in that, as a species, we’re programmed more for immediate gratification than delayed gratification.

What that means to me is that some folks will stay on the sidelines either voluntarily or because of market conditions. Others will decide that it’s in their best interest to make a move this year because in the long run, a slightly higher interest rate or not quite the bottom of the cycle price, won’t affect their long term decision to own a house and impact their desired lifestyle.

It won’t be an easy market for either buyers or sellers, and especially Realtors. This will no longer be a market based upon speed where first to the door or offer table was the winner. Success in this market will be skills based. Buyers, Sellers and Realtors will find success in this market by using data, research and negotiating skills. This market will be about those that use sound marketing and negotiating skills. Something that has been in short supply the past couple of years.

I’m still an optimist and believe that with skills and hard work our agents and clients will do well in the 2023 market.

As we tailor our offerings to you this year, please take a moment and let us know what topics you’d like us to cover in detail this year.

Thanks for reading and for taking the time to give your input.

Have a great weekend.

Paul

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