In a rapidly changing real estate landscape, we are seeing a number of external influences starting to take effect in the local housing market. Existing home inventory has slid to record lows during the 4th quarter of 2022, while demand has remained moderately high with inbound migration leading the way. Interest rates have continued to climb with little relief during the 4th quarter.
The Mid-Market (500K-999K) segment is most affected by these rate increases which has been revealed in sales numbers throughout the region. Cash buyers have continued purchasing luxury properties across the region in the 4th Quarter of 2022, with over half of all closed purchases being cash transactions.
Looking forward, 2023 should be a year in which our localized market sees stabilization into a more sustainable and normalized market moving forward.
While we have seen a mixed bag with sell-through in both the luxury and mid-markets across the region in the fourth quarter, we see this as a normalization of the real estate market. The luxury market across WNC has been trending upward for many years and that continued in 2022.
The fourth quarter saw a slight dip in year-over-year sales, but was positive for the year. Moving into the first and second quarters of 2023, we foresee the Federal Reserve continuing its interest rate hikes which will in turn most likely inch mortgage rates slightly higher in the near term.
The fact is, from 1971 to 2022 the average mortgage interest rate has been 7.76%, which is more than a full percentage point above the current interest rate. Low inventory and sparse new construction starts should hold values steady heading into the first half of 2023. We’ll be keeping an eye on the financial markets — along with the Federal Reserve’s movement over the coming months — as both activities will be key indicators for the housing markets in 2023.