January 2023 – Page 4

Delta Media Leadership Survey Reveals Real Estate Brokers 2023 Outlook

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Majority expects a decline in global and US economy – and profitability Real estate brokerage leaders are rarely a pessimistic group, yet more than half believe the global economy (63 percent) and the US economy (51 percent) will deteriorate in 2023. That’s according to the new Delta Real Estate Leadership Survey of more than 100 brokerage leaders of firms collectively responsible for more than 60 percent of all transactions last year. “Another bigger takeaway is that the closer to home, the more confident real estate brokerage leaders are about the economy improving over the next 12 months,” explained Michael Minard, CEO and owner of Delta Media Group. Most (72 percent) real estate leaders believe their state economy will stay the same or improve over the next 12 months. An even larger majority (75 percent) believe their local economy will remain the same or improve. The independent study found only 4% of real estate brokerage leaders believe the global economy will improve in 2023. However, many leaders are more bullish on their local economies, as 28% of real estate brokerage leaders believe their local economy will improve, and 25% believe their state economy will improve over the next 12 months. “It’s important to note not a single real estate brokerage leader of the more than 100 professionals surveyed believes the global, US, state, or local economy will ‘improve significantly’ in 2023,” Minard added. The survey also revealed real estate brokerage leaders were split on what they believe will happen to housing demand in their local markets in 2023. About one-third say it will improve, one-third say it will stay the same, and one-third believe it will deteriorate. Only 3% of those surveyed believe their local housing market will decline significantly in 2023. Moreover, the survey gauged the confidence level of real estate brokerage leaders today compared to 12 months ago. The survey shows two in three leaders are less confident than a year ago in the global and US economies. In addition, about one in three are less optimistic about their state and local economies. But, overall, most real estate leaders (59 percent) have unchanged confidence in their state and local economies. More bullish about their own business in 2023 More than half (53 percent) of real estate brokerage leaders see their profitability decreasing this year, and their total transactions dropping from 2022. “What is surprising is despite the fact many real estate brokerage leaders believe their profitability and transaction count will decline in 2023, 56% believe their brokerage will increase their local market share,” said Minard, adding “They clearly see opportunity in a chaotic market.” About the survey The independent research, conducted in December 2022 by Delta Media Group, one of America’s largest technology solutions providers for real estate brokerages, collected responses from more than 100 broker-owners and top brokerage executives representing firms that were responsible for more than 60 percent of US residential real estate transactions last year. Nearly one in five (18 percent) of the leaders responding manage brokerages with more than $3 billion to over $10 billion in projected 2022 transactions; 23 percent manage brokerages with $1 billion to $3 billion; 21 percent manage brokerages with $501 to $999 million, and 38 percent manage brokerages with $500 million or less in total transactions. Delta survey participants included leaders from all sizes of brokerages, with nearly one in 10 (9 percent) managing brokerages with 20 agents or fewer; slightly more than one in four leaders (26 percent) managing brokerages with 21 to 100 agents; 41 percent of leaders operating brokerages with 101 to 500 agents; 9 percent of leaders managing brokerages with 501 to 1,000 agents; and 15 percent of leaders operating brokerages with more than 1,000 agents. Forty-three percent of the respondents are 60 years or older; 34 percent are 50 to 59 years old; 20 percent are 40-49 years old; and 3 percent are 31 to 39 years old. In addition, 77 percent are male, 21 percent are female, and 2 percent selected “not listed.” SOURCE Delta Media

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Zillow’s 10 hottest markets are based on factors such as expected home value growth and buyer demand Charlotte will be this year’s hottest housing market, according to a Zillow® analysis. Cleveland, Pittsburgh, Dallas and Nashville join Charlotte in the top five of the Zillow 2023 hottest markets list. “This year’s hottest markets will feel much chillier than they did a year ago,” said Anushna Prakash, economic data analyst at Zillow. “The desire to move hasn’t changed, but both buyers and sellers are frozen in place by higher mortgage rates, slowing the housing market to a crawl. Markets that offer relative affordability and room to grow are poised to stand out, especially given the prevalence of remote work. The good news for buyers is that monthly housing costs have stopped climbing. Home shoppers who can overcome affordability hurdles will find a more comfortable market this year, with more time to consider options and less chance of a bidding war, even if they’re shopping in one of the hottest markets.” Zillow’s 10 hottest housing markets of 2023: Unlike in recent years, fast-growing home values are not a requirement for making this year’s list of hottest markets. Higher mortgage rates and severe affordability challenges have chilled demand and brought home values down from last summer’s peak. Home value growth in Charlotte is expected to be much slower this year than its 11.8% pace of 2022, as is the case in all of Zillow’s 2023 hottest markets and the U.S. as a whole. Charlotte ranks second among large markets in projections for both home value growth and growth in owner-occupied households, which helped shoot it to the top of this year’s hottest markets list. Both Cleveland and Pittsburgh ranked high in projections for time on market and new jobs per new home built. There are only four holdovers from last year’s top 10, an indicator of how much the housing market has changed in just one year. Last year’s hottest market, Tampa, just missed the cut this year, coming in at 11. Austin, 2021’s hottest market, has fallen all the way to 29th on the list, in large part because it now ranks among the country’s most expensive large markets. San Jose, Sacramento, Minneapolis–St. Paul, Denver and San Francisco make up the five coolest large markets in Zillow’s 2023 projections. While affordability remains a major hurdle, the good news for home buyers is that the cost of a typical mortgage fell in November, thanks to lower mortgage rates. Zillow economists expect affordability to stabilize in 2023, if not improve, making it easier for households to budget and plan for their housing decisions. For those able to buy now, less competition from other buyers means homes are staying on the market longer, many sellers are cutting their list price, and there is less chance of being caught in a bidding war. SOURCE: Zillow

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HPSI Inched Upward in December but Remains Well Below Pre-Pandemic Highs The Fannie Mae Home Purchase Sentiment Index® (HPSI) increased 3.7 points in December to 61.0, but the index remains only slightly above its all-time low set in October. Three of the index’s six components improved month over month, including those associated with homebuying conditions, mortgage rate outlook, and job security. Only 21% of respondents believe it’s a good time to buy, likely owing to the ongoing affordability challenges posed by elevated mortgage rates and home prices. Year over year, the full index is down 13.2 points. “In December, the HPSI inched upward slightly, as consumers reported increased expectations that mortgage rates and home prices may decrease over the next year – perhaps reflecting recently observed declines in mortgage rates and average home prices,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. “However, the HPSI remains very low by historical standards, particularly the ‘good time to buy’ component, and respondents continue to cite high home prices and unfavorable mortgage rates as the primary reasons for their pessimism. As we enter 2023, we expect affordability to remain the top challenge for potential homebuyers, as even small declines in rates and home prices – from the perspective of the buyer – may not produce sufficient purchasing power. At the same time, existing homeowners may continue to wait to list their properties, since many have already locked in lower mortgage rates, creating minimal incentive to sell and buy again until rates are more favorable. We think the resulting tension will contribute to a continued decline in home sales in the coming months.” Home Purchase Sentiment Index – Component Highlights Fannie Mae’s Home Purchase Sentiment Index (HPSI) increased in December by 3.7 points to 61.0. The HPSI is down 13.2 points compared to the same time last year. Read the full research report for additional information. SOURCE: Fannie Mae

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Report analyzes transaction volume, debt availability and asset pricing and identifies opportunities in the Americas, Asia, Europe Hines, the global real estate investment, development and property manager, released its global outlook titled “2023: Navigating Through the Labyrinth“. Following the turbulence in 2022, opportunities will abound this year due to repricing, continued outperformance of high-quality office assets, and deflation in some key sectors. Global Chief Investment Officer David Steinbach said, “In a period of global economic discord, transaction volume will be unlocked with debt availability and the reset of pricing levels more in line with expected fundamentals. Successful acquisitions and developments in the new year will also focus on high quality assets that meet customer demands for simplicity and flexibility. We expect to see more accretive opportunities emerge in 2023.” Looking at global trends, the report reveals areas that continue to have strong fundamentals as well as signs for investors to pivot strategies, including improvement in transaction volume, rising availability of traditional debt, and cost-averaging down (i.e., deploying capital patiently during a market disruption). Sectors in Our Sights Utilizing proprietary research tools to analyze market data, the report provides sector insights for the Americas, Asia, and Europe and suggests how real estate investment strategies should evolve this year: AmericasInvestors are still recalibrating their portfolios, as they have seen downturns on both the equity and fixed-income sides of their ledgers. Tenants have been reviewing their growth plans for the year ahead and pausing on new activity, however, there is potential for opportunities during the second half of the year, including: AsiaAgainst the backdrop of this year’s macroeconomic and political headlines, the rebalancing of real estate product types has largely played out. Trends have indicated that the real estate industry’s main sectors may converge further. Opportunities exist in: EuropeAs we look at strategies for 2023, the ‘beds and sheds revolution’ of recent years has played out. There is no longer a standout winning sector. Our ability to understand nuances of quality within a product type has become more important than just picking the right general bucket. Opportunities will include: Click here to read the report and watch a video from David Steinbach, global chief investment officer at Hines. SOURCE Hines

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Veros® Real Estate Solutions, an industry leader in enterprise risk management and collateral valuation services, released its 2022 Q4 VeroFORECASTSM that anticipates home prices will turn negative overall and depreciate on average by -0.5% for the next twelve months. This is a significant drop from the 1.5% annual appreciation forecast just one quarter ago. VeroFORECAST evaluates home prices in over 300 of the nation’s largest housing markets. Veros is committed to the data science of predicting home value based on rigorous analysis of the fundamentals and interrelationships of numerous economic, housing and geographic variables pertaining to home value. Eric Fox, Chief Economist at Veros, commented that, “This decrease to an average depreciation of -0.5% over the next 12 months is the first time in over a decade that Veros’ average house price forecast has gone negative. The last time that the annual forecast was expected to be negative was in 2012 following the aftermath of the previous housing market crash. Though average depreciation is expected now, the fundamentals of the U.S. housing market in 2023 are much better than they were a decade ago. This is not going to be a repeat of what we saw in 2007-2008.” Extreme depreciation is not expected at this time, though the softening market is a stark contrast to what has been experienced in the previous couple of years. The number of markets expected to have annual depreciation has grown from a few dozen during last quarter’s update to nearly half of the markets in this update. Though the number of depreciating markets may seem large, many of them are forecast to have only mild depreciation of just a percent or two. Fox continues by stating, “Interestingly, many markets which were the big housing market winners of the past year or two are now forecast to be some of the worst-performers including San Francisco, Seattle, Austin, Boise, San Jose, and Las Vegas. These markets are all expecting depreciation over the next 12 months which will range from -5% to -7%.” However, many markets and many parts of the country are forecast to do reasonably well with low, single-digit rates of appreciation. The state of North Carolina has five markets in the Top 10, and two middle-of-the-country markets of Wichita and Lincoln are again in the Top 5. Interestingly, the Fort Myers area of Florida, which was hit hard by Hurricane Ian, rocketed into the Top 5 markets in the country due to large demand and limited supply. All of these markets are characterized by lower median prices, meaning rising interest rates have a lesser impact. The 10 strongest performing markets in the country forecast over the next 12 months are only forecast to appreciate at the 4% to 6% level which is down significantly from what the top performing markets were expected to do just a year or two ago. The 10 Strongest-Performing Markets Over Next 12 Months Rank Market Forecast 1 FAYETTEVILLE, NC 6.1% 2 WICHITA, KS 5.4% 3 LINCOLN, NE 5.2% 4 CAPE CORAL-FORT MYERS, FL 4.5% 5 BUFFALO-CHEEKTOWAGA, NY 4.3% 6 CORVALLIS, OR 4.1% 7 GREENVILLE, NC 4.1% 8 GREENSBORO-HIGH POINT, NC 3.9% 9 GOLDSBORO, NC 3.8% 10 BURLINGTON, NC 3.8% The 10 least performing markets over the next 12 months had the most notable changes. In last quarter’s forecast, there were 5 markets forecast to depreciate. However, now all of these 10 markets are forecast to depreciate in the next year. The 10 Least-Performing Markets Over Next 12 Months Rank Market Forecast 1 ST. GEORGE, UT -6.5% 2 PROVO-OREM, UT -6.2% 3 SAN FRANCISCO-OAKLAND-BERKELEY, CA -6.0% 4 SEATTLE-TACOMA-BELLEVUE, WA -6.0% 5 AUSTIN-ROUND ROCK-GEORGETOWN, TX -5.9% 6 BOISE CITY, ID -5.8% 7 SAN JOSE-SUNNYVALE-SANTA CLARA, CA -5.1% 8 LAS VEGAS-HENDERSON-PARADISE, NV -5.0% 9 COEUR D’ALENE, ID -5.0% 10 KEY WEST, FL -4.8% Download the Q4 2022 – Q4 2023 VeroFORECAST results as a PDF infographic or as an infographic image. Download the 10 Strongest-Performing Markets graphic only. Source: Veros Real Estate Solutions

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Knock Buyer-Seller Market Index shows that buyers will have more leverage in the West, while sellers will maintain an advantage in the East As the reality of high home prices and higher mortgage rates sets in, U.S. homebuyers will gain some leverage in 2023. However, shoppers are in for very different experiences depending on where in the U.S. they are looking to move, according to the Knock Buyer-Seller Market Index 2023 forecast, which shows a clear divide between the best markets for buyers versus sellers. According to the Index, which analyzes key housing market metrics to measure the degree to which the nation’s 100 largest markets favor home buyers or sellers, the top 5 buyers’ markets are west of the Mississippi, while the top 5 sellers’ markets are concentrated in the East Coast. “With home prices and interest rates cutting into purchasing power, the relocation hotspots where prices grew quickly during the pandemic will increasingly favor buyers in 2023, while more mid-sized markets offering good job opportunities and affordable housing will be the top performing real estate markets in 2023,” said Knock Co-Founder and CEO Sean Black. “This will usher in a more balanced housing market. However, home shoppers will find different scenarios depending where in the U.S. they are looking.” In like a lion, out like a lamb As 2022 came to a close it was clear the combination of high home prices and interest rates put an end to the frenetic pandemic housing market. Based on the November 2022 Buyer-Seller Index, the latest month of available data, inventory rose in 80 of the 100 largest housing markets and all but two moved at least marginally toward favoring buyers. A total of 2,336,520 homes were sold in the 100 largest housing markets in the first 11 months of 2022, down 19% from a year earlier. Median days on market increased to 22, up from 13 in November 2021. The average sale-to-list ratio, which measures how close homes are selling to their asking price, was 98%, down from 99% in October and 100% a year ago. There were 14 buyers’ markets in November 2022, 46 markets favored sellers and 40 were in neutral territory. Hot pandemic markets become 2023 top buyers’ markets This year’s top buyers’ markets are all west of the Mississippi and were popular relocation spots during the pandemic, which caused home prices to accelerate at a faster pace than the rest of the nation on average. Prices in the top five buyers’ markets rose by 44.6% on average between January 2020 and last month, compared to 34.9% for the rest of the nation during the same period. In rank order, the top 5 buyers’ metros for 2023 are Phoenix-Mesa-Chandler, Ariz.; Colorado Springs, Colo.; Las Vegas-Henderson-Paradise, Nev.; Dallas-Fort Worth-Arlington, Texas and Denver-Aurora-Lakewood, Colo. Although these markets will see median home price growth moderate and even decline from their pandemic peaks in 2023, prices are forecast to end the year 38% above pre-pandemic levels, 3% higher than the national average change. A sign of a slowing market, inventory is expected to grow significantly (54.4% on average) in the top buyers’ markets. Denver will see inventory grow by nearly 100%, ranking second behind Charlotte, N.C., which is projected to lead the nation in inventory growth at 148.3%. Sellers will have the advantage in smaller, more affordable markets Concentrated in the East Coast, the top sellers’ markets are forecast to see the strongest growth in home sales and listing prices in 2023. They tend to be smaller to mid-size markets with populations under 1 million, where home prices remain affordable. Despite increasing by as much as 50% since January 2020, prices in the top sellers’ markets remain well below the national median home price of $374,000. Fayetteville, N.C.; Harrisburg-Carlisle, Pa.; Syracuse, N.Y.; Hartford-East Hartford-Middletown, Conn. and York-Hanover, Pa., top the list of Knock’s best markets for sellers in 2023. Home sales across the top sellers’ markets are forecast to rise by between 5% and 18% over the next 12 months. The exception is Hartford, Conn., where home sales are projected to dip by 1.7%. In contrast, sales are forecast to decline by 16.3% for the rest of the nation by the end of 2023. On average, the median home price in these markets is expected to increase 8.3%, compared to the less than 1% increase forecast for the U.S. as a whole. Days on market will average 15 days, half the forecasted national median of 30 days, while average months’ supply will be just one month, compared to 3.1 months for the 100 largest markets. Housing market will gain momentum in the spring before turning to buyers According to the Index, the nation’s 100 largest housing markets will continue to teeter in neutral territory over the next few months, gain some momentum toward sellers in the spring and then move firmly into buyers’ market territory by summer – a trend that will continue through the end of the year. By November 2023, 36 markets are forecast to be buyers’ markets (up from 14 in November 2022), 41 markets will remain sellers’ markets (down from 46), and 23 will be neutral. As the market continues to cool, the 100 largest markets are projected to see home sales decline by 16.3% year over year. Fayetteville, Ark., will face the largest falloff at -22.9%. By the middle of 2023, months’ supply will surpass three months for the first time since the summer of 2019. Charlotte, N.C., is forecast to lead the nation in months’ supply at 12.7 – double that of Port St. Lucie, Fla., which is forecast to have the second-highest months’ supply at 6.2. Nationally, the median sales price is forecast to peak in June at $386,000, consistent with a typical home selling season. By November, the median price is forecast to be $374,000, basically flat compared to November 2022. Median days on market will continue to rise throughout 2023, reaching 30 days across the U.S. by November 2023, with Colorado Springs, Colo., leading the nation at 121 days. Average sale prices across large housing markets are forecast to remain lower than the average ask price in each of the next 12 months, keeping the sale-to-list ratio below 100% through 2023.