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My Predictions for the 2023 Real Estate Market in Harrisonburg and Rockingham County |
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 After several years of an ever increasing number of homes selling in Harrisonburg and Rockingham County, we saw a slowdown in 2022. There were 7% fewer home sales last year (2022) than the previous year (2021). One of the main reasons for this decline in the number of home selling is the increase in mortgage interest rates during 2022. The average 30-year mortgage interest rate was just above 3% at the start of 2022... and just above 6% at the end of 2022. Understandably, some would be home buyers were a bit less interested in or a bit less capable of buying with that magnitude of a change in mortgage interest rates. Looking ahead to 2023, I believe we'll see yet another decline in the number of homes selling in Harrisonburg and Rockingham County... for a few reasons... [1] I don't think we are going to see significant declines in mortgage interest rates in 2023. Perhaps they get back down to 5.5% or maybe 5.25% but I don't think we'll see them get down to (or below) 5% in 2023. With continued high(er) mortgage interest rates, I don't think we're going to see a big influx of buyers back in the market to buy who stopped looking in the second half of 2022 when rates rose. [2] I think there will be far fewer "elective" home sales and purchases. Over the past few years it was so easy to sell one's home quickly (with multiple offers, at an amazing price) and this lead to plenty of homeowners electing to upgrade to a new house. Sell easily, quickly, at a great price and buy with a super low interest rate... easy... let's do it! Now, homes won't necessarily quite as quickly and the mortgage interest rate on a purchase would be much higher... so I don't think as many buyers will sell and then buy unless they really want or really need to sell and buy. [3] Fewer home buyers upgrading (selling and buying) means fewer existing homeowners selling... which will also limit the number of homes that buyers could buy... because of the limited number of sellers selling. All that to say... I think we're going to see even fewer home sales in 2023 than we did in 2022. As per the graph above, I'm predicting another 7% decline in the number of homes selling in Harrisonburg and Rockingham County in 2023... which would take us back to a bit less active of a market than in 2019... though quite a bit more active than in 2018. And how about those sales prices... of the number of homes selling declines, will we see home prices start to decline?  After three years in a row (2020, 2021, 2022) of double digit growth in the median sales price... I am predicting that we will see a smaller increase in that median sales price in 2023... but yes, still an increase. Here are a few of the reasons why I think we will see an increase in home prices in 2023... [1] To the extent that the price of everything keeps going up (inflation) it seems likely that home prices will continue to rise. Inflation doesn't seem to be cooling off anytime soon (yikes, no fun, not a fan) which would make it even more surprising if we saw home prices start to decline. [2] The decline in home sales in 2022 -- and the predicted decline in 2023 -- have been a result in lower levels of buyer interest, but despite that, inventory levels have not meaningfully increased. Slightly fewer buyers are buying, but because slightly fewer sellers are selling, inventory levels have remained consistently low, which does not provide any downward pressure on home prices. [3] The Harrisonburg area continues to be a popular place to live, work, relocate, retire... and this continued interest in this growing area seems likely to keep home prices rising. All that is to say, I think we'll see an increase in home prices over the next year... but not as large as we have seen for the past three years. I am predicting a 5% increase in the median sales price over then next year. So... I'm predicting fewer home sales and a continued increase in sales prices... how could I be wrong? How could I be wrong? Plenty of ways. ;-) 1. We could see an even sharper drop in the number of homes selling if mortgage interest rates go even higher or if inflation gets even more out of control or if we enter into a full blown recession or if there are other major economic and job market changes in 2023. 2. We could end up seeing an increase in home sales if mortgage interest rates start to decline significantly, or if there is major employment growth in the area resulting in ever more would be residents seeking to buy a home. 3. We could end up seeing another 10% (or higher) increase in the median sales price if buyer demand continues to outpace seller supply. We're still in that territory now... but I think that price growth is going to soften a bit in 2023. But yes, prices really could rise another 10% or more in 2023. 4. We could see a decline in the median sales price if mortgage interest rates keep rising and if home buyer activity falls significantly and if inventory levels start rising. There you have it folks... my predictions for local housing market in 2023. What are your predictions? Where is our local market headed next? Recent Articles:
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Scott Rogers
Funkhouser Real
Estate Group
540-578-0102
scott@funkhousergroup.com
Licensed in the
Commonwealth of Virginia
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