The year 2022 will go down in history as a year in which the market turned. Only a year ago, it was common for sellers to receive multiple offers over the list price and non-contingent offers were the norm. Now, buyers know they have the upper hand and they are writing offers with contingencies and getting concessions such as seller credits to buy points to lower their mortgage rates.
What will happen in 2023? How low can home prices go?
I wish I had a crystal ball and I could tell everyone how to time their home purchase or sale perfectly. Here are my thoughts and suggestions for 2023 and beyond:
- Are you buying a place to live in or are you buying for speculation? Be clear on your intentions. If you are buying to invest in your life and you have long term thinking, then don’t try to time the market; buy when it is right for you.
- Does your current home meet your needs? If you are happy with your home, but think prices have come down from the peak, just wait 2-5 years and let the market come back.
- Do you really need to sell right now? The median length of ownership in the US is 13 years. Look at property values in almost any 13 year time frame and you will find that appreciation rates are dramatic. There may have been periods of ups and downs during that period, but the net result is positive.
- Buying is almost always better than renting. Rents are rising because the housing market has cooled. When you pay rent, your money goes out the door and will never return. When you are paying a mortgage, a portion of your payment is building equity for you.
- Working From Home is a fundamental change that gives you more options. Even if companies require their employees to come into the office one or two days a week, buyers seem willing to handle a longer commute. This gives you a larger geographic area to consider for your next home.
- If you are selling at a discount, you can probably buy at a discount too. If the markets do drop notably, say 15%, and you need to upgrade urgently for more space, taking a 15% loss on a $1.5 million home to buy a $2.5 million home that is also discounted by 15%, the result is a savings of roughly $150K more.
- No one times the market perfectly. It is pure luck to buy at the bottom of the market and sell at the top. It is unproductive to dwell on the past and its impossible to predict the future.
- You can only generate a loss or a gain when you sell. All other losses and gains are hypothetical – basically on paper and in your head.
- I know a seller who sold his home and made a much smaller profit than he would have made if he had sold at the peak. But he lived in the home for over 10 years and had 10 years of enjoyment, 10 years of equity-building that would have otherwise gone to the landlord, and 10 years of tax deductions. And he’s happy because he still made a lot of money.
- With continuing inflation, shrinking land, rising populations and greater density, the best is yet to come for San Francisco. Yesterday’s “peak” is only visible in the rear view mirror.
After 19 years in the business, the one thing that I can guarantee is that the market will change. The market never rises continuously or dips permanently. You need to be ready to make your move when the time is right for you. Everyone’s situation is different, so please call me for guidance on making the right move for you.