The Housing Market for 2023 has a lot in store for the appraisal industry. With plenty of factors to help us determine where to go from here, are you up-to-date on what to expect? Join us for our free upcoming webinar on January 12th at 2 pm ET, “2023 Housing Outlook: The Economic Indicators All Appraisers Should Monitor” sponsored by McKissock. Learn all about what to expect with our hosts Jared Preisler, Kevin Hecht, and Ryan Lundquist.
Buzz: What is your background in the industry?
Ryan Lunquist: I entered the profession in 2002. I’ve been appraising full-time ever since, and I am also regularly hired to share about what is happening in the local housing market. I am often speaking somewhere once a week to unpack the housing market.
Jared Preisler: I have been an independent fee appraiser for 25+ years and trained seven appraisers. I’m an AQB certified USPAP instructor, Chief Appraiser for DataMaster, and I earned both the SRA and AI-RRS designations from the Appraisal Institute. I have served on several industry boards and advisory committees.
Kevin Hecht: I am a Certified Residential appraiser in Missouri. I got my start working for a family business and then got the chance to work for a local bank as a Staff Appraiser. I have also worked as a Staff Appraiser, District Manager, and Regional Manager for Bank of America and later worked in Appraisal Management and Appraisal Education at CoreLogic. I am also a certified USPAP Instructor.
Buzz: What are some of the similarities between what we are currently going through, the Great Recession, and the crash in 2008?
Ryan: The rate of price change has been very similar in Sacramento when it comes to the drop in 2007. This year since May we’ve experienced a price drop about three times faster than the normal seasonal change, and that helps us understand that this is not just something seasonal that is happening. Moreover, our sales volume is down over 40% right now from a normal trend, and that also reminds us of the valley of lower volume during the previous market drop (though not quite as bad at the moment as the previous market got up to 50%+ change from the previous year).
Jared: I think it might be easier to says what’s different. We are not yet seeing the large number of foreclosures because most folks still have good jobs, unemployment is low. The trigger in 2008 was 2nd mortgage delinquency whose terms were not favorable, and the economy was not as strong. While I do think we will see foreclosures later this year, they will be manageable. The demand will offset the added inventory. Rates should settle a little lower and as price continue to fall affordability will be manageable.
There are some similarities to 2008. First, is the uncertainty in the market at several levels. In 2008, I don’t remember agents have such a hard time pricing property. Also, limited access to money, although for a different reason, through increasing mortgage rates have eroded purchase power. Pricing can correct to compensate for the rate increases.
Kevin: I think the current environment differs from what we saw in 2008 and the Great Recessions. The foreclosure rate is much lower and is expected to remain lower than in 2008. Homeowners have more equity which gives them more flexibility if they experience financial difficulties. The unemployment situation remains favorable for workers, and with the high demand and low supply, we shouldn’t see a significant rise in inventory.
Buzz: What are the factors impacting the housing outlook for 2023?
Ryan: Affordability is the number one factor right now. After eleven years of price growth, and exponential growth during the pandemic, we’ve reached a place where it’s become difficult to afford the market. Along that note, what happens with mortgage rates, the economy, and buyer confidence is ultra-important. Right now, we are seeing buyer demand wane, and affordability will help bring buyers back to the market. Bottom line.
Jared: Inventory levels and mortgage rates are certainly factors.
Kevin: Interest rates are one of the primary factors. In addition, inventory is still impacting the housing market.
Buzz: How can appraisers properly monitor these indicators for 2023?
Ryan: I suggest reading local and national sources on the housing market, follow people who are sharing objective perspectives, unsubscribe from voices that are fostering sensationalism, and actively cultivate objectivity by knowing the stats well enough to be able to spot hyperbole and sensational housing bits. One of the dangers in today’s market is there are lots of voices selling a narrative to get clicks. Appraisers were built for a market like this though to be a voice of reason and neutrality. Appraisers are often overlooked when it comes to giving a take on market dynamics, but we can absolutely share valuable perspective within our local markets. One of the most important aspects right now is to understand what normal looks like so we can spot abnormal. For any given month I suggest knowing what normally happens that month to prices, inventory, days on market, and lots of other metrics so we can speak definitively on what is happening in the local market. In short, being a market expert has nothing to do with being licensed. Expertise only happens as we cultivate it. And now is the time to cultivate expertise by knowing the numbers better than anyone.
Jared: More than ever, I think appraisers need to be keyed into the specific market participants. Some market will be more sensitive to interest rates while some are less dependent on financing. Even in the same neighborhoods, different products have different demand. I remember an example from a CE course that reminded us, if there are no buyers for a property, there cannot be market value. So, knowing the true demand, market driven/relevant features, the principle of substitution will help appraisers understand the markets.
Kevin: One of the most important things is to remember that all markets are different. Appraisers need to stay on top of what is happening in the specific markets they appraise. Reviewing market factors more frequently is necessary since conditions are changing more rapidly.
Buzz: Why should appraisers attend your webinar?
Ryan: It can be helpful to pick up a few ideas for talking about today’s market and what to watch out for.
Jared: Anytime you have the opportunity to increase your knowledge and sharpen your tools you should take advantage. We will give some specific points to watch and how shifts can impact value.
Kevin: This webinar will help appraisers understand some of the market forces currently impacting business and provide a look into what might be coming as we move forward.
Make sure to join us for our free upcoming webinar on January 12th at 2 pm ET, “2023 Housing Outlook: The Economic Indicators All Appraisers Should Monitor” Can’t make that time? Sign up to receive the recording directly in your inbox!