What to Tell Your Clients About the 2023 Real Estate Market

How’s the market?

It’s a question you get asked daily. And to be taken seriously, you don’t want to sound like this:

But with access to more information than you can consume, it’s critical to know what data is the most important to share—and how to make it relevant for consumers in your local market.

This week, we teamed up with Keeping Current Matters (KCM) for a BAM Webinar. During our conversation, KCM President David Childers reviewed what you need to know in order to articulate what’s happening in the market with your clients.

So, what exactly should you tell your clients about the 2023 real estate market? Read on for our key takeaways—and talking points— from the webinar. 

What’s Happening with Mortgage Interest Rates

No matter what market you are in, mortgage rates concern buyers and sellers alike. 

But trying to predict or pinpoint what will happen with mortgage rates is extremely difficult. That being said, we can be educated on the topic. 

Let’s start by looking at rates in 2022, which doubled over the course of 12 months.

We’ve never seen this happen in a year. Along with the fastest rise in rates on record, it caused the market to hit the brakes. Consumers became scared and put the thought of buying or selling on hold. 

Fast forward to now, and what we’re seeing is consumer panic is starting to subside. Before we get to that, let’s start with the basics. 

For the past 50 years, mortgage rates have moved in unison with the 10 Year Treasury. So if you want some insight into what direction rates will go, study the U.S. 10 Year Treasury.

From there, you can look at the average spread between the 10 Year Treasury Yield and the 30 Year Fixed Mortgage Rate. Typically, if you take the 10 Year Treasury number and add the average 1.7 spread, you get the 30-year fixed mortgage rate. 

What happened in 2022, however, is the spread jumped up to 2.67—causing mortgage rates to jump up as well. According to David, that is a measure of fear in the market. If we were to return to a normal spread tomorrow, we’d be around a 5.5% interest rate instead of the low 6’s. 

So, how do analysts at KCM know the panic is starting to subside? By looking at the data:

As you can see in the graph above, the spread between the 10 Year Treasury Yield and mortgage rates increased as panic set in over the summer months of 2022. And while we’re still above the 50-year average, the end of 2022 brought a decrease in the spread. 

If the trend continues, we may return to the average spread in 2023—which would be good news for the entire housing market. 

Expert Predictions for the 2023 Real Estate Market

So, what are the experts forecasting? 

David called on a Lawrence Yun quote to begin: 

Based on the discussion about mortgage rates and the average spread, this makes sense. We may not be out of the woods yet, but the good news is rates have likely already hit their peak. 

As far as 2023 total home sales, most economists forecast around 5 million homes will sell in 2023. 

Something that economists don’t agree on, however, is home prices. Take a look at the differences in home price forecasts from seven industry analysts:

During the webinar, David clarified what can be taken from these predictions.

And what always dominates price? Supply and demand. 

So as an agent, you need to study the following in your local market:

• Transactions
• Pending transactions
• Active listings

As you review the data in your market today, compare it to what was happening a year ago. This will give you some insight into supply and demand—and in turn—home prices for your market.

Where’s the Opportunity?

Now, what opportunities do agents have to help consumers in today’s market?

One is to help homeowners understand what they can do with increased equity. Homeowners have built up an incredible about of equity over the past two years—and many are going to want to put that equity to work. 

The opportunity for agents is to engage in that conversation. Ask leads and past clients—have you thought about what you want to do with the equity you’ve earned? From there, share resources and data about what their options are. 

But David said the biggest opportunity for agents is expired listings. 

In 2020-2021, there weren’t any expired listings because everything was selling in a matter of days. Now that expired listings are starting to reappear, agents have an opportunity to gain more listings. 

By making calls (we’ve got scripts for you here) and opening up conversations with these homeowners, you can show sellers their options—and what you can do to help them. 

Tune in to the full conversation for more insights on the 2023 real estate market!