Redfin's 2023 Housing SLUMP Forecast REVEALED [Where To Buy].

everyone meet Kevin here it's another

long day in the office and we just got a

report from Redfin about their housing

market predictions for 2023 I've already

done the Deep diving for you I've got

some comments to add to the highlights

I've added to the report so without even

a single pitch let's just get into the

video the most likely scenario is what

Redfin is going to present in this

although it is possible that we end up

having a better than expected inflation

report coming soon and maybe even better

than expected inflation for the coming

months and that could actually improve

the results of this report although I'm

skeptical with some of the results of

the report and I'll provide you what I

think prediction number one reference

cites that home sales are likely to fall

to their lowest level since 2011. now

note this is not home prices this is

home sales they're expecting 16 fewer

home sales in 2023 than in 2022 and 2022

already saw a large decline from 2021

and Redfin believes that people will

ultimately only move if they need to

that's because a lot of folks who own

homes already have locked in really low

interest rates today where rates are at

about six and a half percent 95 percent

of people would not benefit from a

refinance that means their rate is lower

than what they could get in the open

market today

now they talk about how we might see not

only the lowest home sales since 2011

but also the lowest housing turnover

rate since the 1980s with just 32 out of

every 1 000 homes selling

in 2023 and later in the report they

talk about how this could actually

potentially turn into a remodeling Boom

for homeowners who stay put now I'm

skeptical that we'll have a remodeling

boom during a potential recession sure

there might be more well-off individuals

who will choose to remodel rather than

move but I believe there's a larger

likelihood that more people are going to

stay put and do nothing and save money

though you just never know

so uh going back over here the Redfin

report believes that mortgage rates will

probably stay strong averaging about 6.1

percent all the way through 2023 and

ending the year slightly around 5.8

percent because remember this is the

2023 housing report not the 2022 housing

report now this is actually way above my

expectations I would have thought that

come the middle of next year we would

have potentially seen mortgage rates

fall to closer to five percent so the

fact that Redfin thinks rates are going

to stay close to six percent through the

end of next year in my opinion is

actually going to be substantially more

damaging to home prices than what

they're going to estimate in their

predictions here keep in mind Morgan

Stanley is calling for a 15 drop in home

prices in 2023 not considering a

recession if we enter a recession that

15 could be worse and is more likely to

align with what my belief is a 15 to 25

percent home price decline do keep in

mind obviously we've had a big bull run

since the pandemic with a lot of home

prices going up 50 so hey look if you

had a hundred dollar house that's now

worth 150 and then you have a 25 decline

off of 150 that still puts you at 112.

still puts you above where we were uh

right before the pandemic but getting

close to those 2019 levels or at least

in line with 2019 levels is my belief of

where we're heading but I'll show you

what Redfin thinks as well Redfin says

that you're purchasing power at a six

and a half percent rate with a twenty

five hundred dollar a month budget gets

you into about a 383 000 home and if

rates fall to 5.8 which is their

prediction by the end of 2023 you could

potentially afford up to a four hundred

and six thousand dollar home

they also mentioned that if inflation

proves stubborn it's possible that rates

could stay elevated even higher and

longer but they're still guiding for

around six percent now they do think

that home prices will post their first

year-over-year decline in a decade I

think this cat this is already like

solidified at this point I think once we

get to March April and we look at year

over year comparisons we're going to be

negative probably somewhere between six

to 12 percent and I think more pain is

coming uh now it's possible that some of

the loss in prices Redfin might be

assigning to 2022 because they think

that prices will fall four percent in

2023 in addition to the contraction that

we've already seen in 2022 they actually

suggest that home prices are in their

opinion likely to decline in the first

quarter and then Bottom by the summer Q2

Q3 and then slowly start Rising again

and into the end of the year I think

this is wildly optimistic and if they

actually think rates are going to stay

around 5.8 percent I think this is

potentially too Rosy of a scenario here

I would be more cautious about this

however I have also with my real estate

startup house hack been considering

shopping for Real Estate starting about

the middle of 2023. now what I do think

is interesting is the markets that they

think are actually going to hold up

quite well and we're going to talk about

those next year they do which I actually

agree with think that a housing

foreclosure wave is relatively unlikely

completely agree look at this the

Midwest and Northeast and East Coast

metros especially Connecticut Upstate

New York and the Chicago area are likely

to hold up well even as the housing

market cools they make this argument

that there is not going to be another

Austin and even Austin's not going to be

Austin that areas like Boise and Austin

in Tampa Florida that were hot during

the pandemic probably won't actually be

hot as hot at least during the next

housing boom and that there could be

better opportunities basically trying to

you know promote home values and and

people moving to areas like Illinois or

Connecticut for genziers and individuals

who can work from home and work remotely

which they think is going to be a big

part of the next decade I found this

very interesting because they find these

areas have a good balance of

affordability they missed out on that

pandemic run up and that crazy boom time

during the pandemic but I also noticed

that MO most of these areas are in much

cooler areas they're actually not in the

Sun Belt or in the south in fact they're

all basically above the cooler areas or

warmer areas they're in cooler areas

Lake County Illinois Chicago Illinois

Milwaukee Wisconsin Albany New York

Baltimore Maryland Elgin Illinois

Rochester New York Pittsburgh

Pennsylvania

and New Haven Connecticut as well as

Hartford Connecticut

actually thought this was very very

insightful and personally I'm actually

interested in traveling to all of these

markets to explore them for myself to

see what my thoughts are on these

markets so we'll see on the other end of

the spectrum they say here we expect

prices to fall the most in pandemic

migration hot spots like Austin Boise

Phoenix and of course other areas they

also say that expensive West Coast

cities are likely to be see outsized

price declines because of stumbling tech

stocks and a shift to remote work

pricing people out of these markets I

thought that was very interesting rents

they do believe will fall as well as

construction will become uh you know

where construction will fall for single

families but we'll focus more on rental

units leading rents to fall as well as

the potential that fewer renters will

become buyers next year although that

should keep up the housing Supply or I'm

sorry that should keep up housing demand

for rentals they actually believe that

people might become reluctant to sell

their homes

even homes that they've moved out of and

instead homeowners may just rent out

their homes rather than sell because

they don't want to lose the low interest

rate they have this is a very

interesting argument it could actually

bode well for airbnbers and there is a

potential fear that you end up having an

Airbnb bust if there are too many people

renting out properties on Airbnb at two

low evaluations to where it doesn't make

sense to do Airbnb rentals anymore this

is a big Trend that I'm paying attention

to and falling rents is a big deal

because it affects real estate

valuations and cap rates they do say

here we expect rents we expect to see

rents fall soon in places where

apartment Supply is growing rapidly

including Boise Phoenix Charlotte and

Raleigh North Carolina now this I think

is also very interesting so you have to

be careful because you've got an overlap

here you've got some areas that were

housing pandemic boom towns like Boise

and those areas are now not only

expected to see potentially larger price

declines but also rent declines so

potential hot potatoes when it comes to

investing very important things to pay

attention to certainly things we're

taking into account at househack keep in

mind I also do real estate analysis

anytime somebody submits a deal that

they've submitted for Real Estate

analysis because they've written an

offer or they're under contract on a

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estate

so then we also have uh this idea that

potentially some gen zeers and young

Millennials who have saved up money to

buy a home might actually wait for

either prices or rates to come down or

just delay home ownership uh while they

invest in stocks instead and this is

actually in my opinion not necessarily

the worst idea because I kind of think

the stock market actually when I say I

kind of think I strongly believe the

stock market is going to bottom well

before the real estate market bottoms I

believe that so I think there's this

potential to sort of ride the stock

market up once we start getting lifted

out of the recession uh or or at least

the recession begins and the stock

market starts leading us to a close and

then real estate it will potentially

bottom maybe a year or two after that

we'll see it could take a lot longer for

the real estate market to bottom than

what Redfin is projecting here I don't

know that we're going to see as shallow

as a dip as Redfin is expecting here but

we'll see we'll be paying attention to

it closely Builders are likely to focus

on multi-family rentals construction

spending might shift to remodeling we

talked about that a little bit they do

make a prediction here that investor

activity will bottom out in the spring

and then rebound however we're likely to

see fewer institutional buyers for a

while especially since Redfin is

stopping their eye buying Open Door is

cutting back a lot I think Open Door is

probably going to go bankrupt in fact

there's speculation and rumors that

they're basically already looking for

bailout partners because they're they're

collapsing uh it sounds to me like they

just need better management they need to

handle much better what they're doing

than what they are doing but whatever

uh they also say here that investors

will likely start buying more homes in

the second half of the Year taking

advantage of slightly lower home prices

I expect that to be lower home prices

not slightly lower home prices but I

agree with that that's kind of what

we're targeting with house hack my real

estate startup roughly the the third and

fourth quarter of 2023 listing activity

from investors is likely to be lower

than a year before though some will need

to offload inventory because of the

buying sprees that they've had over the

last couple years this is true Jen's

ears will prioritize affordability

lifestyle weather and proximity to

family and they target areas like Tucson

Arizona or Savannah Georgia for

mid-sized moderately priced places I do

think there is a likelihood that uh

mid-price to lower price properties will

see less of a drop than other markets

though usually the entire real estate

market moves together over time it just

they move in different phases right

Austin might collapse first and Boise

might collapse in parts of Florida might

collapse but then you might actually see

that end up just spreading everywhere

that's because of the principle of

substitution

they also talk about how Insurance costs

are changing especially in California

our beachfront real estate in Florida

because of hurricane and earthquake

costs and that these risky areas could

actually be very expensive to invest in

definitely something that we're keeping

in mind especially with insurance

premiums increasing 33 percent year over

year in 2022 and expect it to rise even

more

some cities are following the yes in my

backyard approach of more denser housing

getting rid of the single-family zoning

allowing a single family to turn into

duplex or Triplex this is not with

accessory dwelling units known as adus

this is not working very well in

California but that's because California

politics and building departments are

saddled with the most disastrous

bureaucracy I've ever seen in my life

but in areas like Portland Oregon or

Minneapolis maybe you have a little bit

of a better opportunity to see some

conversions from single families to

multifamily and those could actually

create opportunities for cash flow think

about it if you could get a really good

wedge deal on a single family home in

let's say Minneapolis and then you're

able to turn the garage into an Adu you

could substantially increase the cash

flow that you're getting per the

investment that you're making so uh some

real opportunities there so you better

have really good Architects and know

that law in the building and safety

departments like the back of your hand

and personally I recommend you buy a

place you renovate it you rent it out

while you rent it out that's when you

submit building plans to see if you can

turn something into an Adu that way you

don't have a vacant property waiting for

the city

instead you have a project that's under

review while you already have income

coming in Redfin goes on to suggest that

buyer agent commissions will actually

likely rise slightly as potentially

thousands of real estate agents leave

the industry in 2023 I expect this to

happen I expect this to hurt companies

like Redfin and expi companies that

potentially have a little bit more of of

a discount reputation to them and you're

going to see more of that sort of full

service premium real estate broker

become very valuable in this environment

so these are some of my thoughts learn

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