FORECAST: Realtors predict stable 2023

Local Realtors are spending this week creating a marketing and sales game plan for 2023 — but that could prove difficult with so many factors coming into play after a multiple-year pandemic and a slowing economy that included rising interest rates and supply constraints.

“CRYSTAL BALLS ARE A LITTLE FUZZY”

It’s still very much a seller’s market, said Paul McGarigal, of RE/MAX Properties SW.

“(In the first quarter of 2022), the demand was way greater than the supply because we had other factors affecting the supply — i.e., the builders couldn’t get supplies to build,” he said. “And the interest rates were so attractive that the buyers were buying everything.”

But all that changed last summer, and inflation and rising interest rates affected many potential homebuyers.

“Our government decided to start raising the interest rates, and within two months the brakes hit, and by July the buyers were, in many cases, priced out of buying a house,” McGarigal said. “The interest rates went from 2.75% around April; by July-August-September, the interest rate was 7%.

“What that did was it affected so many, especially the starter-home buyers,” he said. “The people were buying in the $300,000s and $400,000s, those payments went from $2,500, $2,800 to $3,300. … That just kicked out a lot of buyers. At the same time, the greedy landlords of the world decided to take advantage of all the people who were renting because they didn’t have another choice.”

For example, he said, for the last 30 years, folks who were paying $1,800 in monthly rent could qualify for a mortgage in the same amount.

“When the interest rates rose and the demand became so much greater than the supply … the rents went from $2,200 to $2,800 and from $2,500 to $3,200 and then they couldn’t buy because they couldn’t qualify for a $3,200 (mortgage),” McGarigal said. “Paychecks didn’t go up.”

Tennille Biggers, of Keller Williams Elite Partners III, said the market in West Orange County remains strong. But it’s difficult to forecast what 2023 will bring.

“Crystal balls are a little fuzzy,” she said. “No one knows what the interest rate is going to do. … We can tell clearly that the interest rate has affected the market, which I think needed to happen. But we were not sustainable last year.

“It's predicted the interest rate may stay around where we are at now,” Biggers said. “I don’t think it will stay at 6.3% for all of 2023. If that’s the case, here in Central Florida I expect that the market is going to continue like it has in the last quarter. I predict that (2023) is going to be strong like this last quarter. There is more inventory on the market … which is healthy.”

But, she said, buyers are being cautious.

“I don’t think it’s time for sellers to panic,” Biggers said. “Values are strong. They need to have a little patience. Realtors need to say, ‘Your house might be on the market for a month’ … and they can still do very well.”

The median sales price in Orange County a decade ago was about $140,000, according to Stellar MLS.

The average home price in West Orange County and Southwest Orange County at the end of 2022 was in the $500,000 to $600,000 range, McGarigal said, although there are plenty of neighborhoods with homes close to and exceeding the $1 million price tag.

He is seeing on the market million-dollar homes in the Dr. Phillips area in neighborhoods such as Parkview Reserve, Phillips Grove, Ruby Lake and Phillips Landing and in Winter Garden’s Lake Hancock area.

“I think we’re seeing a temporary cooling off (of the market), but I don’t think we’re seeing the prices going down much because there’s still such a demand,” he said. “Prices are not going down; they’re just not going up stupid like they were a year ago.”

It’s still very much a seller’s market, McGarigal said; the last time Realtors experienced a buyer’s market was around 2009 in what he called “a market meltdown” and residents saw foreclosure signs in yards.

RESALES OVER CUSTOM

McGarigal said he’s seeing another trend that he expects will continue in 2023 — buyers are leaning more toward resales over spec and custom homes.

“When you go to buy a new house right now, the (construction) contract says, ‘We have seven months to 2 years,’” he said of the homebuilding timeline. “Think about that, if you’re a buyer, you’re renting probably. How do you even tell your landlord, ‘I’m not renewing my lease.’ How do you lock in the interest rate if it’s going to be seven months? How do you lock in the price of materials? The contract says the cost could go up.

“What that does is it drives people to buy resales,” he said. “If they want to buy a resale, they can close in a month.”

McGarigal believes the resale market in West Orange and Southwest Orange will remain hot this year and chalks it up to theme park expansions, the construction of the high-speed rail and other occupational factors.

“There are plenty of jobs bringing the people in,” he said. “They’ve got to have a place to live. But in the end, it would be my advice — and I’m sure most Realtors would say — if you had a choice between renting for another year and buying now, I would recommend you consider buying now instead of waiting a year.”

PLENTY OF BUSINESS

“If we look at November (2022), sales were down 45%, but this is so subjective, because (in 2021) at this time we had nothing to sell,” Biggers said. “Inventory is going up, and I do relate that directly to interest rates have gone up a lot since last year. If we look at December 2021, if we look at a 30-year fixed mortgage, we were at 3.1%. December 2022 — same type mortgage — we’re at 6.3%. The interest rate has doubled.

“As far as inventory, what’s available in the market has more than doubled year over year,” Biggers said. “But that’s subjective. We were so far gone (in 2021). … Last November (2021), we were down to less than a month of inventory (in the Greater Orlando area), and now we have 3.6 months of inventory, which is still a seller’s market. A balanced market is when you have about six months of inventory.

“In November 2021 the average days on market was 28 – everything from new construction to distressed properties,” she said. This November (2022) our days on market are 43. So we haven’t even doubled.”

McGarigal said he expects buyers will have to look farther outside West Orange and Southwest Orange to find affordable housing options, including Haines City, Davenport and Groveland.

“Nobody’s income is going up as much as the cost,” he said.

Real estate agents like Biggers and McGarigal aren’t too worried about 2023, though, and aren’t hesitant about future sales in this area.

“I fully expect in this coming year that there’s plenty of business for the agents who are working,” Biggers said.