💼 Almostradomus

briefcase | invest smarter | issue #106

Happy holidays to all the loyal briefcase readers. We hope you all got into the holiday spirit the same way we did, by yelling JESUS over and over while putting up the Christmas tree.

We will be taking a short break from our regular programming for the holidays, but we'll be back better than ever in your mailbox on January 6th. We are taking a family vacation, which, like having major surgery we'll need at least 1-2 weeks of recovery.

Finally, if you've enjoyed reading briefcase over the past year, please share with just one colleague or friend. Tell them why they should subscribe. We couldn't ask for a better gift 🎁😁!

🔮 Fortune Seller

....Challenge accepted internet. Predictions are fun; they're probably wrong but are instantly gratifying. Kind of like cheese enchilada Doritos.

The internet is good at being so close to getting prediction right. Kind of like Almostradamus — Nostradamus' lesser know brother. To celebrate being almost right, we've rounded up the most interesting predictions for real estate in 2023.

But first, my holiday prediction is that on Christmas day my kids will rip into their presents like feral hyenas finding a half-dead zebra during a drought.

I've got a good feeling about that one.

Now, let's discuss some real estate predictions that will occupy our collective grey matter for a few weeks and then be lost to the vast tundra of the internet. What fun!

🤗 So, what will real estate look like in 2023? In short...

Cold, with a hint of unchecked optimism and delightful excitement.

🔮 Prediction 1: Bubble Trouble?

Windermere Real Estate chief economist Matthew Gardner says there will be no real estate bubble:

Over the past couple of years, home prices got ahead of themselves due to a perfect storm of massive pandemic-induced demand and historically low mortgage rates. While I expect year-over-year price declines in 2023, I don’t believe there will be a systemic drop in home values. Furthermore, as financing costs start to pull back in 2023, I expect that will allow prices to resume their long-term average pace of growth.

We couldn't agree more. In fact, we have been popping bubbles like a 3-year-old hopped up on skittles since 2020.

🔮 Prediction 2: Drop in Mortgage Rates

Redfin predicts that the rapid rise in interest rates will slow, even decline, before settling at around 6%.

We tend to agree with this assessment, the central banks are seeing inflation ease and now have the firepower to drop rates should we enter a serious economic downturn.

🔮 Prediction 3: Prices

Realtor.com made their 2023 predictions, outlining that they not only don't believe prices will fall, but will actually increase 5.4% year-over-year.

This is primarily due to limited supply and stubborn sellers, who "don’t want to lower their asking prices too much after watching their neighbors make bank just a few months ago. And there are still too many people who want homes than there are available residences to go around."

CoreLogic agrees. They don't see a hard landing for housing prices (sorry bubblers). CoreLogic believes price deceleration is bottoming out, and smaller price increases will continue into 2023.

🔮 Prediction 4: Rents

Realtor.com also expects rents to continue a strong, yet moderated growth path. Despite the ongoing rent price growth deceleration, chief economist Danielle Hale says:

U.S. renters will continue to face challenges from limited supply and excess demand in the coming year 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.

🔮 Prediction 5: Co-Buying

Zillow sees 2023 as a year of co-buying and co-borrowing, as a result of the affordability issues discussed at length in this newsletter.

With housing costs rising far beyond previous affordability norms, those chasing down homeownership are turning to unconventional means of making it pencil out financially, and this should continue in 2023. A Zillow survey fielded this spring found that among successful recent homebuyers, 18% had purchased along with a friend or relative who wasn’t their spouse or partner, and 19% of prospective homebuyers intended to buy with a friend or relative in the next 12 months.

This is why we recently wrote about the rise of AGUs [Accessory Grandma Units 👵🏻👵🏾]. We couldn't agree more with this prediction and can't wait to see more of gam-gam, minus the hard candy.

🔮 Prediction 6: First-Time Landlords

Zillow also predicts that we will see a surge of first-time landlords due to the significant rise in purchases of recreational properties and second homes from 2020 onward.

Given the overall softening of the resale market and the continued robustness of rentals, many non-landlords will find it more economically viable to begin renting out these properties than keep them solely for personal use.

🔮 Bonus Prediction: Briefcase = 🚀

We've been making some changes here at briefcase, and 2023 will be the year of rapid growth. We recently held a meeting of the minds 🤓, including some scientists 👩🏾‍🔬👨🏻‍🔬, and came up with this technical chart to give you a sense of what's in store for briefcase in the coming year.

We predict a 5x increase in subscribers by the end of the year.

For our loyal readers, this means better and more frequent real estate content. And a few other surprises we have in the works.

📺 Stay tuned.

So What? According to Almostradomus, there will be no bubble, prices will moderate, and interest rates will plateau and may even drop. Whether or not we are entering a severe economic and housing winter, you should all be prepared. Remember, recessions can be a good thing.

As the great leader of Arendelle once said...

What's your prediction for the housing market in 2023? Respond to this email and let us know.

Thanks to all for an amazing 2022! We tripled our audience and aim to do even more in 2023.

Alright, time for a break, see y'all on Jan 6th.

Weekly Real Estate Stories

📊 Ugh: Housing and mortgage markets aren't expected to meaningfully recover until 2024 — Fannie Mae

😔 Is 2022 Over Yet? Homebuilder sentiment caps off a year of declines with a new record low — MPA

🏡 Ma and Pa: 52% of adults between the ages of 18-29 are living with parents — AG

🌞 Rates Improve: Mortgage rates fall slightly on evidence of waning inflation — Zillow

🌞 Mortgages Improve: Refinance demand jumps 6% as rates dropped to the lowest level since September — CNBC

📉 Rents: November marks the 10th month of slowing rent growth, with average rent now at $1,712, down by $22 from last month — Realtor.com

💸 Ouch, My Wallet: In 2022, rising interest rates led to a nearly 60% jump in monthly payments — CoreLogic

💰 Cash Baby: The share of homes bought with all cash hits highest level since 2014 — Redfin

Up next, on briefcase...

...We boycott kissing men at midnight. It’s New Year’s Eve, not New Years Steve.

Read the most-shared newsletters:

💰 4,300,000 Reasons to Invest in Real Estate
🦹 Have We Seen Peak Agent?
🤑 Regulation Inflation Makes Up 40% of Build Costs
🏡 Missing Middle Housing
👮‍♂️Yes, Affordable Housing is Illegal

Written By Brad Cartier