Question: What is your housing forecast for 2023 in coastal Orange County?
Answer: It seems like every consumer and even real estate professionals have the same questions. The post-pandemic economy is one we’ve never seen. Predicting the future is always fun. My “Guru” crystal ball may be no better than anybody else’s.
With that said, and with four decades on the frontline selling homes and managing multiple real estate offices since 1975 amid several cycles/recessions, this is my prediction: Prime coastal properties in excellent condition and location will not see price declines.
Listing prices will continue to drop, not sale prices. Many homeowners and their agents apparently did not realize that the market peaked in March 2022. Many homes that were listed after that were egregiously overpriced.
As the market slowed because of mortgage rates doubling overnight, as a result of the Fed’s actions to curb the highest inflation in 40 years combined with stock market volatility, sales slowed to 40% less than last year.
Inventory and listing shortages post-pandemic have been at historical lows. It is true, listings/inventory have improved this year, but still down 50% of pre-pandemic levels. Listings tapered off in the past 30 days because of seasonality.
What was normal is no longer the case. This is a paradigm shift in the way real estate will be transacted in the future.
It is still a supply and demand business. Limited supply and strong demand are the reasons I predict home values will not drop.
Furthermore, lets add a tad of common sense. The majority of homeowners refinanced their loans to 3% or less. Mortgage rates in January started at approximately 3%.
In the past few months, mortgage rates have bounced between 5.5% and 6.25%. Who really wants to list and sell their home and get a 6% mortgage while simultaneously doubling or tripling their property taxes?
Will Rodgers would say, “They ain’t movin’.” Death, divorce, and out-of-state relocations are a likely source of upcoming listings.
Deceleration of Appreciation: After two years of rapid appreciation and home values increasing nearly 20% per year, I predict there will be a “deceleration” of appreciation to 10-12% this year and 5-10% in 2023.
Q: I’ve inherited my parents’ home and want to sell it. What should I do?
A: First of all, you should obtain both legal and tax advice from knowledgeable estate experts. Depending on how title was held at the date of death will determine how to proceed.
Ideally, title was held in a living trust and not an individual name, which could be subject to probate court proceedings. Probate can take a very long time to resolve, and tax implications could be significantly more than in a living trust.
For homeowners, I highly recommend obtaining legal advice from an estate attorney on the benefits of holding title in a living trust versus not.
Upon death of a homeowner, normally the beneficiary should obtain what is called a “date of death” appraisal. Either a licensed appraiser can do this, or in some cases, a licensed realtor. It may be used in the event of an IRS audit in the future.
Prepping a property for sale is critical. Remove personal items, make necessary repairs, paint, and re-carpet. Consider staging the home as well.
Finally, have a copy of the will and/or trust to give to your realtor, who in turn can send to the title company for review and pre-approval, as they will be insuring the transaction.
Have a real estate question? Email Phil Immel at Phil@RealEstateGuru.com. Visit RealEstateGuru.com. The Real Estate Guru® has more than four decades of experience listing and selling homes in South Orange County. As a licensed real estate broker, Phil majored in Real Estate at San Diego State University and is also an expert in mortgage, title, escrow, appraisal and negotiations.