What’s Happening in the Housing Market – Q3 2022 Market Update
December 15, 2022 – 5 Minute Read
The Morshed Group Q3 2022 Market Report
Watch our much anticipated Q3 2022 Market Update. We cut through all the noise you’re hearing to nail what actually happened, and where the market is really going in 2023, with powerful data and keynote trends.
Q3 2022 ended with Austin giving back most of its price gains from the first half of the year, supply rising and yet the market still maintaining a supply inventory that is technically undersupplied.
Values across the market pulled back 5% due to interest rates jumping to almost 7% (from 3.5% only a year or so ago), stock market valuations being down 20%, inflation hitting 8% and job market concerns. Supply ended at 3 months, which means there was about 11,000 homes on the market. This is up from 1 mth and 3,000 homes in Q1. For context, a 6-month supply (or 18,000 homes) is an equilibrium market between Buyer and Seller demand.
Ultimately, fear started driving the market. Buyers are gating buying with all the concerns mentioned, they’re trying to adjust to higher interest rates and homes are now sitting on the market for an average of 60 days, even though supply is still at 3 months.
Summarizing the big shift, multiple offers occurred 10% of the time, compared to 70% of the time in Q2.
- Tier-1 homes (priced right, no major flaws and wow factor) sold on average in 10 days with multiple offers 10% of the time and average not more than 2-5% over list price compared to Q2 at 10-15% over list and 7-10 offers
- Tier-2 properties (mostly a Tier-1 but with one flaw such as needing cosmetic updates) averaged 90 days on the market and 5% below list price compared to 45 days on market and still seeing multiple offers 50% of the time in Q2
- Tier-3 (major issues or work) sat on the market 150+ days and sold 15% below list price compared to 90-120 days and 7-10% below list in Q2
Currently, and where its going:
We have seen supply continuing to rise, and likely we end up at 5-6 months with prices dropping another 5% in Q4 even though prices usually don’t drop till we get above 6 months supply.
However we also don’t believe a major pullback will happen in Austin as we likely still see 40k jobs added to our local economy in 2022, even if it sheds 20k jobs in the next few months. Job growth is the primary driver in Austin for housing. Additionally, Austin’s unemployment rate is a healthy 3% currently. If we lose 20k jobs, that equates to 2% of our overall workforce, our economy can sustain that. Austin also has the highest share of equity-rich households in the nation, and we’re the #2 fastest growing metro. We will still see 50k people still having moved here in 2022.
- $0-$500k We are at 3 months supply, up from 1.5 months in Q2
- $500k-$1M We’re at a 4.5 month supply, up from 2 month in Q2
- $1m-$2m We’re at 6 mth supply, up from 4 month in Q2
- $2m+ – We are edging up to 7 months from 4 month in in Q2
Being past the peak now, pricing correctly is important as Buyers are a) gating moving forward quickly given the economic tailwinds and hits to everyone’s pocketbooks and b) adjusting to a big bump in rates. Buyers simply aren’t going to pay you above what your home is worth now and if you’re clearly overpriced to pandemic market pricing, you need to drop your price. To sell in the first few weeks, you have to get ahead of the market by pricing right otherwise you’ll chase the market down as it recalibrates.
The intensity of terms favoring sellers, and being way above list price has finally come to a stop. However, don’t wait as inventory will remain below equilibrium even past Q2 2023, which means you’re not getting steals vs negotiating some or not being in as many multiple offers. Rates will inch up further also which means the cost is still very real to you even if prices are no longer aggressively moving up. It’s a good time to buy…you’ll have a bit more choice and pliability and given Austin’s dynamic, we think Buyers have about 6 mths before the market strengthens again while rates also rise.