As 2023 draws to a close, we are naturally drawn toward looking back on the year and its most memorable events. The real estate industry certainly had its share with rising interest rates and their impact on the market leading the news.  Here’s a look in the rearview mirror of the top real estate stories of 2023.

As interest rates soared, memories of 2008’s market debacle flooded back and the real estate marked slowed.  But, while some buyers stepped back and sellers found fewer multiple-offer bidding wars, 2023 was not 2008.  Financially, homeowners were in good shape.  Delinquencies and foreclosures remained low and equities climbed.  By mid-year, the fear factor subsided as demand for houses remained strong.   

Higher interest rates are driving homebuyers to the sidelines as they wait for a downward adjustment of rates from the Federal Reserve Bank.  Long gone are the under 3%  rates on a 30-year fixed loan of 2020 and 2021, but the 7.5% 30-year fixed rates are forecast by Fannie Mae to ease downward to around 7.1% by the end of the year.  The National Association of REALTORS® predicts they'll be in the 6% to 7% range by the spring of 2024.  

For buyers, higher interest rates make it harder to afford a home and may force them to either wait for lower rates, adjust their new home must haves, or buy at the higher rates and hope for enough of a drop to justify refinancing.  Either scenario creates uncertainty and stress for buyers.

For sellers, higher rates can mean fewer buyers, especially at certain price points. Fewer buyers translate to more days on the market.

Growth in median home listing prices continued to rise ever so slightly in 2023. The national median home listing price increased to $429,500 in September 2023, but at 0.41% that was only less than half a percent over the same time last year. The increases are attributed to strong demand coupled with low inventory. The conventional wisdom is that prices will skyrocket and bidding wars recommence once buyers see the light at the end of the mortgage interest rate tunnel. As a hedge against anticipated price increases, some REALTORS® advised clients to buy at current prices and interest rates, if possible, and refinance when rates moderate. Fannie Mae predicts home prices will rise by 2.8% by this time next year. 

Investopedia warns against expecting houses to be more affordable in the near future because the U.S. is building too few new houses.  “Since 2012, 2.3 million more households have been formed than homes built,” according to an analysis by Realtor.com cited by Investopedia.  “And as long as there are far more people who need houses than there are houses, the market isn’t going to function well.” As long as demand is high and inventory is low, home prices will be higher than normal.

Perhaps the most enduring legacy of the COVID-19 pandemic is the revolution of the workplace. As employees worked from home, they and their employers discovered they could work remotely and thrive.  Now, it appears, business models are changing and remote or hybrid work is here to stay. Particularly in large urban areas, the ability to work from home or a remote office spurred urban homeowners and renters to the suburbs and nearby small towns. Suburban homeowners sought new homes with space for a home office or renovated to create a space.

If remote work continues long term, there could be significant consequences for downtown commercial properties, according to an article by the Counselors of Real Estate (CRE).  “Economists estimate that, as a legacy of the pandemic and decentralization, 50% of the workforce will work remotely or in a hybrid manner in the future.”  

Embracing new technology, for many, is a path of uncertainty.  But artificial intelligence, or AI, already is mapping a new course for REALTORS® incorporating AI into their business operations.  The National Association of REALTORS® says, “Artificial Intelligence has become a game-changer for the real estate industry, offering a wide range of capabilities to improve efficiency and productivity.”  One tool allows buyers to let AI find listings for their ideal home by describing the style, features, and location they desire.  Other AI tools can write listings, generate social media content, arrange and revise showing schedules, and even provide traffic reports for an agent traveling to a showing.  

AI can and will automate some tasks for REALTORS®, but that should be viewed as an ally, not a competitor, according to technology experts who spoke at NAR’s recent NAR Emerging Business and Technology Forum.  Christopher Linsell, from Elm Street Technology, emphasized that, while AI will automate many tasks traditionally performed by agents, it cannot replace the core purpose and personal touch they bring.

Whether spurred by economic conditions, the pandemic, or availability and affordability of single-family living, multi-generational housing is a trend that addresses the needs of a growing number of American families.   According to a 2021 report by Generations United, the number of those living in the U.S. who responded that they live in a household with at least three generations increased by over 270% between 2011-2021.  A recent NAR panel discussion addressed the trend where multiple generations live together in a variety of arrangements including one dwelling or a primary home with additional dwelling units.  

 "We've been saying intergenerational living, multigenerational living is here to stay.  And it's here to stay because it's being consumer-driven. Whether it's your own family or someone in the neighborhood, it's the way of the future,” said Donna Butts, executive director of Generations United, in addressing the forum.   She pointed out that homeownership rates could be positively impacted by the trend of buying a home with your family: "One strong benefit of multigenerational housing is the fact that you can pull resources oftentimes and buy that bigger house that you need, and you might qualify for financing that you wouldn't have been able to qualify for alone."

News stories are like items in a time capsule -- mainly relevant to the time they occurred but offering insight into the future. Here’s to a new year filled with good news.