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Wrapping Up 2022

And what to expect in 2023 By Ben Geanetta, REALTOR®, Team Lead

Sandpoint Real Estate

Nationwide, the real estate market saw some pretty big swings in 2022, and North Idaho was not immune. The unrealistic year-over-year appreciation of homes slowed only to ramp back up … then come to a halt. The main cause: interest rates being volatile due to inflation.

As interest rates spiked, home prices dropped for the first time in approximately 24 months! During this transition, home buyers who didn’t have to buy a home became weary and chose to hold off, and rightfully so. Who wants a high-priced home with a high interest rate? Exactly. No one.

Overall, North Idaho saw homes stay on the market longer, saw price reductions, and sellers gave more concessions to buyers. Knowing how the market wrapped up in 2022, what can we expect to see in 2023?

Here is real talk; are you ready? No one knows. If we knew then there would be more people in the Bahama’s sipping on Mai Tai’s with a little umbrella decorating their drink. But instead, I will give you my opinion on what I expect based on data and what I’m seeing out in the field.

First, let’s start with a trend: Eight out of the last nine years, the number of homes for sale in North Idaho has fallen. In the month of August 2014, there were a total of 3,304 homes for sale. In 2021, that number shrunk to 986 for the month of August! In 2022, we saw the number of homes for sale come up slightly to 1,642 for the month of August, almost back to 2019 numbers but still well short of 2014.

Now, let’s talk about those amazing mortgage interest rates from the past few years; the sub-4 percent rates. Owners are not likely to trade in their 3 percent rate for a 6.5 percent or even a 5 percent rate; unless they have to. It’s basically free money, and renting the home out to cover the rent will not be an issue.

New construction is still down from the 2008 crash, and with the rising interest rates of 2022, many home builders stopped buying material as their confidence was shaken in fear of buyers not being able to afford to purchase.

Here is the last data point I’ll mention, and I hope you’re sitting down for this one. Nearly 40 percent of all homes in America are mortgage free. Let that sink in. Forty percent of homeowners are not paying a monthly mortgage. This all adds up to low historic inventory, and low inventory with high demand equates to prices remaining strong.

I know where you are going next, but the interest rates, what about those? Won’t that bring prices down? With more homes on the market, there is more competition, therefore prices will come down, right?

All good points, however, factor in this. The crash of 2008 we saw 10.4 months of housing supply. In 2022 there was 3.2 months of supply. When months of supply dip below 3, that is considered a seller’s market, and when months of supply surpass 6 months, that is a buyer’s market. Between 3 and 6 months is a balanced market. So, as you can see, inventory is so low, and with no signs of that changing, prices will stay strong.

That doesn’t address the interest rate, and I’m going to cover that now. The best thing you can do is turn the TV off and stay off media sites. I know they are calling for 8 percent interest rates, and I disagree with them. This is where the Bahamas comment comes into play.

In late November, the CPI report finally had positive news as the Feds were going to tackle inflation. We saw mortgage rates start to fall from the upper 7s and drop almost 1.5 percent. The rates have stabilized and continue to show improvement.

So, what can we expect with the 2023 housing market? Houses will still appreciate—but at a responsible and realistic rate. I’m predicting a 3.5 to 4.5 percent appreciation.

Understand, North Idaho is still a destination, and it’s easier to work remotely thanks to the pandemic.

Affordable housing will still be a challenge, but this doesn’t mean giving up. Be sure to hire a great real estate agent who is knowledgeable, full-time, and has an all-star team. Doing so will help increase the chances of you buying the house you want or selling your house—all while lowering your stress of the transaction.

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