The Morshed Group Q4 2022 Housing Market Report
Watch our much anticipated Q4 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.
What Happened:
Q4 and 2022 ended with the market being very quiet. Buyer activity was minimal, prices trended down and yet inventory held at a very healthy level for a “down” market.
We saw 7% depreciation across the market in Q4. Looking at the big picture for 2022, prices shot up 15% by June and by end of December prices retracted the same 15%. Basically, we ended the year flat on price appreciation showing strong resiliency considering news across the stock market, inflation, interest rates and national job layoffs.
Supply ended at only 4 months and actually an undersupplied real estate market which is healthier than we expected. For context, a 6-month supply (or 18,000 homes), is an equilibrium market between Buyer and Seller demand. At 4 months supply, there are about 12k homes on the market. Additionally, at 4 months we’re 40% below a balanced market so we should actually have seen appreciation but we saw depreciation.
Buyers shut it down in Q4. Activity was very slow. A lot of folks gated due to FEAR of what might happen, not economic fundamentals being off. That’s why we didn’t see appreciation vs depreciation in spite of 4 months supply. This led to homes sitting for 55 days on average. In conjunction, Sellers ended up averaging 90% of list price vs 105% of list price around the middle of last year.
Currently and where it’s going:
The early returns for 2023 are what we expected. A portion of Buyers have realized the market isn’t crashing in Austin and are buying.
We do expect to see 10k-20k jobs lost locally over the next few months. However, in present day Austin that’s 2% of our job force. The psychological impact will be larger than the actual economic impact but on a macro view, Buyers will pause in fear leading to a 5% pullback in prices through Q2 and then flat rest of the year. However by end of Q2, most will realize the market REALLY isn’t crashing here leading to the rest of the year getting busier.
For 2023 respected economists Angleos Angelou and John Hockenyos are expecting 60k+ jobs. Austin’s unemployment rate is a very low 3% currently. Factoring for the coming job layoffs, we expect the actual number to be closer to 30-40k jobs which will still create enough demand for housing that we shouldn’t see inventory rising above 6 months in 2023.
Population growth for 2023 is expected to be around 60k people per the same economists and city demographer Lila Valencia. All those folks will need housing.
And anecdotally, Austin is ranked #4 in Financial Health Index for major metros over 1M people, households her are simply better poised for a recession here than most places
For Sellers:
For Sellers, you have to price in 2023 to stand out as a value. Given the fear in the market, homes that stand out as “value” are ones that will get attention and sell. Too many Sellers are still pricing to “test the market”…which simply isn’t working and we are seeing Sellers chase down the market when they could have sold earlier and netted more by being more of a value proposition in the beginning.
For Buyers:
For Buyers, between now and end of Q2 2023 is absolutely the best timing. As mentioned, by then the rest of Austin will figure out the market here isn’t crashing. Likely most of the job cuts will have happened by then, Buyers will have financially and psychologically calibrated around higher interest rates, and rates will also start inching down. So, buy now while others aren’t to pick up best pricing.
