Balance. It’s both one of my personal goals for this year and my prediction for the 2023 real estate market. The insane seller’s market of the last couple of years is over, but most experts agree that 2023 is much more likely to bring a normalization of the housing market than a crash. Buyer’s will enjoy a slower pace, more leverage in negotiations, prices lower than the peak of 2022, and perhaps even some ‘deals’ in certain situations, but here in LA I am not anticipating any major crash as the basic supply and demand dynamics just don’t support it. 

Inflation continues to be the thing to watch. It has been trending in the right direction and interest rates are down from the recent peak, but we aren’t out of the woods yet and the Fed is committed to its plan. We should in no way expect rates to come down to anywhere near the levels we enjoyed in 2021 and early 2022 - which means we won’t see the same levels of demand and sales either. Most experts agree we should see a lot more stability in rates this year, which is good news for the market. Volatility and uncertainty results in hesitation and inaction.

Buyers are coming to terms with the new reality and resetting expectations based on today’s rates. Agents, lenders and sellers are getting creative to put deals together. With that being said, affordability challenges have and will continue to impact buyer demand. But in markets like LA, we still have large numbers of cash buyers and demand from all around the world. For many savvy and sophisticated buyers, real estate is seen as a hedge against inflation and stock market volatility.

I expect inventory to remain tight as building lags far behind what is needed to keep up with demographic trends and would-be sellers are hesitant to let go of 2 or 3% mortgage rates. 

Homes that aren’t well presented, well priced or have desirability challenges will sit on the market in a way that we just didn’t see the last two years and likely sell for much less than they would have (if they sell at all) - dragging down averages. 

Well priced, well presented, good quality homes in desirable locations will continue to be in demand and deliver large gains for their sellers.

I expect this all to result in a much more balanced market in 2023, where neither buyers nor sellers hold all the power. We may continue to see a bit of a stand-off between buyers (who have more leverage and options than they have in a while, albeit less purchasing power) and sellers (who -in many cases- can hold on to their properties if they don’t get the price they want). As always, it will come down to individual circumstance and motivation. 

Overall, I am predicting prices to either stay relatively flat or come down a bit year over year for the Los Angeles area as a whole. I expect prices will be down in some areas and up in others, leading to not a huge change overall.

Nationally, the predictions are all over the place, giving us a similar takeaway. Some areas are likely to see modest appreciation, others will have declines, overall things will most likely be somewhat flat.

The key things to watch as we move through the year that will have the biggest impacts on the market:

1. What happens with inflation and interest rates. Will inflation get under control? 
2. The job market and overall economy. Will we see more job-loss amongst higher earners (more likely to be homeowners / home buyers) this year?
3. How policy impacts the quality and cost of living in LA. How will new tax policies, the ongoing homelessness crisis and other political issues impact the desirability of LA?

Have questions, comments or thoughts on the above? Curious what this means for you and your possible plans to buy or sell? Let’s talk.