Ocala Real Estate Forecast 2023

The Ocala real estate forecast is for strength in intermediate and long terms. Of course, last year one factor drove the real estate market more than any other, rising mortgage rates. 

In March 2022, the Federal Reserve began a series of interest rate hikes in an effort to tamp down inflation.¹ Then mortgage interest rates reacted as expected and began to rise. As a result, demand has begun to decline and the rate of appreciation has slowed. The primary challenge for homebuyers has shifted from availability to affordability. However, we are still in a seller’s market. Nationally, there is currently a 2.5 months’ supply of homes for sale. That is well below the 5 to 6 months’ supply which would be expected in a balanced market.

So what can we expect in 2023? Will mortgage rates continue to climb? Could home prices come crashing down? While this is one of the more challenging real estate periods to forecast, here’s what several industry experts predict will happen to the U.S. housing market in the coming year.

MORTGAGE RATES WILL FLUCTUATE LESS

In 2022, 30-year fixed mortgage rates surged from roughly 3% to over 7% in a span of one to two months. According to Rick Sharga of real estate data company ATTOM, “We’ve never seen rates more than double in so short a period of time.”²

This year, economists forecast a less dramatic shift.

In an interview with Bankrate, Nadia Evangelou, senior economist for the National Association of Realtors, shared her vision of three possible mortgage rate scenarios:³ 

1. Inflation could continue to surge, forcing the Fed to repeatedly raise interest rates. In that scenario, she predicts that rates could reach as high as 8.5%.
2. Inflation could decelerate and mortgage rates follow suit, averaging 7 to 7.5% for the year.
3. Rising interest rates could trigger a recession, which could ultimately cause mortgage rates to drop closer to 5% by the end of the year.

Realtor.com forecasts something similar to scenario #2 above: “Mortgage rates will average 7.4% in 2023, trickling down to 7.1% by year’s end.”⁴ However, the Mortgage Bankers Association projects something closer to Evangelou’s third scenario, with the 30-year fixed rate declining steadily throughout the year, averaging 6.2% in Q1 and 5.2% by Q4.⁵ But importantly, it does not specifically attribute the projected decline to a descent into a recession.

Fannie Mae’s Projection

Economists at Fannie Mae fall somewhere in the middle. In a recent press release, they predicted that the U.S. economy will experience a “modest recession” this year.⁶ But in their December Housing Forecast, they project that 30-year fixed mortgage rates will only fall by half a point from an average of 6.5% in Q1 to 6.0% in Q4.⁷

“From our perspective, the good news is that demographics remain favorable for housing, so the sector appears well-positioned to help lead the economy out of what we expect will be a brief recession,” said Fannie Mae Chief Economist Doug Duncan.⁶

What does this Ocala real estate forecast factor mean for you? 

The experts aren’t certain where mortgage rates are headed. Therefore, you cannot be either. So instead of trying to time the market, you would be wise to take a more prudent approach. Focus on buying or selling a home when the time is right for you. There are a variety of mortgage tools available that can make a home purchase more affordable. Among them are adjustable rates, points, and buydowns. Additionally, refinancing is always an option should rates drop significantly in the future. So instead of considering mortgage rates in a vacuum, look at everything that factors into your decision. For example, if you are a renter considering a move to homeownership, compare the cost of each. Take into consideration the appreciation that comes with ownership. Consider the stability created when you don’t have to budget for yearly rent increases. Then make the decision that serves your family best.

SALES VOLUME WILL FALL AND INVENTORY WILL RISE

It looks like the home-buying frenzy we experienced in recent years is behind us. While the desire to own a home remains strong, higher mortgage rates have made it unaffordable for a large segment of would-be buyers. 

By and large, economists expect the number of home sales to continue to decline this year, leading to increases in listing inventory and days-on-market, a measure of how long it takes to sell a home. Then, they expect the real estate market to rebound in 2024. But they differ greatly when projecting the rates of decline and rebound.

Economists at Fannie Mae forecast that total home sales will fall by around 20% this year, before rising by nearly 15% in 2024.⁷ On the other hand, National Association of Realtors Chief Economist Lawrence Yun projects a less extreme dip of 7% in 2023, with a rebound of 10% next year.⁸

Realtor.com Chief Economist Danielle Hale foresees something in between. “The deceleration in home sales is likely to continue as high home prices and mortgage rates limit the pool of eligible home buyers. We anticipate that existing home sales will decline another 14.1% in 2023,” opines Miss Hale. She expects this drop in sales to lead to a nearly 23% increase in inventory levels this year, offering more choices for buyers who have struggled to find a home in the past.⁹

However, given the very low inventory of homes currently available, even Miss Hale’s projected rise in inventory would leave us in a sellers’ market and below pre-pandemic levels. Hale points out: “It’s important to keep historical context in mind. The level of inventory in 2023 is expected to fall roughly 15% short of the 2019 average.”⁹

What does this Ocala real estate forecast factor mean for you?  

If you’ve been frustrated by a lack of inventory in the past, 2023 may bring new opportunities for you to find the perfect home. Additionally, you can expect to have more negotiating power than buyers have had in years. However, you are still likely to be facing inventory levels well below those of a stable market.

On the other hand, if you are planning to sell this year, you may want to act fast. If inventory levels rise during the year as projected, you are likely to face increasing competition and days on the market as you move deeper into this year. We can help you to navigate this market and get good results. Please reach out to schedule a free consultation.

HOME PRICES WILL REMAIN RELATIVELY STABLE

While some economists expect home prices to fall this year, most expect them to remain stable. “For most parts of the country, home prices are holding steady, since available inventory is extremely low,” said Yun at a November conference.⁸

Nationally, Yun expects the median home price to tick up by 1% in 2023, with some markets experiencing greater appreciation and others experiencing declines.⁸ However, economists at Fannie Mae offer a slightly less optimistic projection, forecasting a decrease of 1.5% year-over-year in their Home Price Index.⁷

Other experts foresee a larger fluctuation. Hale expects U.S. home prices to rise by 5.4% this year, while Morgan Stanley economists are forecasting a 7% drop from the peak reached in June of 2022.^9,10

Still, many economists agree that a housing market crash like the one we experienced in 2008 is highly unlikely. The factors that caused home prices to plunge during the Great Recession, lax lending standards and a surplus of inventory, are not prevalent in our current market.¹⁰ Therefore, most expect home values to remain relatively stable.

What does this Ocala real estate forecast factor mean for you?  

Don’t stress about buying a home in this uncertain market. To be sure, real estate is a long-term investment that has been shown to appreciate over time. Additionally, consider that the expected stable prices in 2023 and significant appreciation in 2024 may make buying a home now a wise decision.

Of course, if the time is right for you to sell this year, you may want to act quickly for the reasons explained earlier in this article. As you evaluate your course of action, please reach out to us. We’ll be glad to answer your questions and provide the information you need to make the best decision for yourself and your family.

RENT PRICES WILL CONTINUE TO CLIMB

Affordability challenges for would-be buyers, inflationary pressures, and the low inventory of homes on the market are likely to continue to drive rents upward in much of the country.¹¹ The Federal Reserve Bank of Dallas expects year-over-year rental prices to tick up to 8.4% in May before moderating later in the year.¹²

According to Hale, “U.S. renters will continue to face challenges from limited supply and excess demand in the coming year, challenges that will keep upward pressure on rent growth. At a national level, we forecast rent growth of 6.3% in the next 12 months, somewhat ahead of home price growth and historical rent trends.”⁹

However, there are signs that the surge in rent prices could be tapering. According to Jay Parsons, head of economics for rental housing software company RealPage, there is a trickle of evidence of a slowdown in demand. He predicts that market-rate rents will rise just 3.3% this year. Still, analysts agree that a return to lower pre-pandemic rental prices is unlikely.¹⁰

What does this Ocala real estate forecast factor mean for you? 

Rent prices are expected to keep climbing. But you can lock in a set mortgage payment and build long-term wealth by redirecting rent money toward a home purchase instead. Reach out for a free consultation. Let’s discuss your options. The more you know, the better position you will be in to make sound decisions.

Additionally, if you’ve considered investing in a rental property, now may be a perfect time. We can help.

WE’RE HERE TO GUIDE YOU

While national real estate forecasts can help you to understand the real estate forces our economy faces, real estate is local. Therefore, as local market experts, we can offer information and advice more directly related to the Ocala real estate forecast.

If you’re considering buying or selling a home in 2023, contact us now to schedule a free consultation. We would be honored to work with you to develop a local action plan to meet your real estate goals and deliver the results you want.

“The finest moment in your life will be when you buy a property right now.”  – Warren Buffet

Selling or buying a home is about a change in lifestyle, the building of wealth, security and stability. To coin a cliche, “The best time to invest in a home is yesterday. The second best is today!” Actually, that wisdom is a paraphrase of an ancient Chinese proverb.

Andrew Kruglanski, MBA, ABD, Broker

Ocala Home Guide Realty

(352)234-3048

andy.k@ocalahomes.online

Sources:

1. Forbes –
   https://www.forbes.com/advisor/investing/fed-funds-rate-history/
2. Bankrate –
   https://www.bankrate.com/mortgages/will-mortgage-rates-go-up-in-december-2022/
3. Bankrate –
   https://www.bankrate.com/real-estate/housing-market-predictions-2023/
4. Realtor.com –
   https://www.realtor.com/news/trends/2023-the-year-of-the-homebuyer-our-bold-predictions-on-home-prices-mortgage-rates-and-more/
5. Mortgage Bankers Association –
   https://www.mba.org/docs/default-source/research-and-forecasts/forecasts/mortgage-finance-forecast-dec-2022.pdf?sfvrsn=b584bf7_1
6. Fannie Mae –
   https://www.fanniemae.com/newsroom/fannie-mae-news/economy-still-expected-enter-and-exit-modest-recession-2023
7. Fannie Mae –
   https://www.fanniemae.com/media/45801/display
8. National Association of Realtors –
   https://www.nar.realtor/newsroom/nars-lawrence-yun-predicts-us-home-prices-wont-experience-major-decline-could-possibly-rise-slightly
9. Realtor.com –
   https://www.realtor.com/research/2023-national-housing-forecast/
10. The New York Times –
    https://www.nytimes.com/2022/11/04/realestate/housing-market-interest-rates.html
11. CNBC –
    https://www.cnbc.com/2022/09/28/how-much-higher-rent-will-go-in-2023-according-to-experts.html
12. Federal Reserve Bank of Dallas –
    https://www.dallasfed.org/research/economics/2022/0816

"Nothing influences people more than a recommendation from a trusted friend." - Mark Zuckerberg