The first 30 days of 2023 have come and gone. In real estate – the first 30 days are a critical indicator for the rest of the year. In a typical year inventory rates climb in January through February and into the spring. We start out slow with a few new listings and we build until we hit the peak of the spring market in March and April with the maximum amount of newly listed properties in inventory. This year, inventory fell in the first 30 days of January. The pullback of January 2023 was stronger than the pandemic shut down of March 2020 and the lack of properties for sale and that impact serves as a cautionary tale for our industry and the economy at large.
Housing makes up 17% of GDP and the US Economy relies on consumer spending for economic growth. 70% of our economy is based on consumer spending. So, what happens when there are no homes to buy due to a lack of inventory? GDP slows and that is a leading indicator of a recession. Based on early results (the number of properties for sale) the slow down is likely bigger than predicted, based on my Midwest Milwaukee experience. January of 2023 saw a 45% decline in available housing inventory over 2022. That is the driving a decline in the local housing market and nationwide as homeowners are comfortable in their 2.5% mortgages and are not motivated to sell. So, it remains a seller’s market with very low inventory and pent-up demand. Prices remain steady for now, but consumer perception of the economy is shifting.
The consumer is losing their appetite to buy a house with still competing bids and low supply, so buyer housing fatigue is setting in again. This slow receding enthusiasm drains the economy over time and leads me to believe that there will be a bigger slow down ahead and I am not sure about lower prices? I think if buyers find a home they like and they can win the house they should move forward with a purchase. You can expect low inventory to stay with us, I am not expecting a shift in inventory rates of new available housing to change for years.
Have a plan.
It was a great 10 years of robust real estate activity. It would continue that way if we had more available inventory, but we are down over 20 Million units in the United States to balance the market. Low inventory will plague our markets for years as housing starts falling behind the growing US population. Expect housing to remain tight and prices to remain pretty steady. Plan for tight inventory and steady prices in your housing needs and real estate business. There will be few “deals”.
