The analysis of the global real estate sector for 2023, developed by the Avalon Investment Research center, has two well-defined trends among its specialists, which they believe could shape the future of global real estate during 2023.
Some believe that a real estate crisis similar to the one in 2008 could occur, while others believe that the world will experience a recession.
The latter will play a necessary role in containing inflation, given that the market greatly stimulates the economy with its need for materials and labor.
After all, the direction of the housing market depends largely on the duration of the interest rate hike cycle. The upside is that lower prices would make homes more affordable for first-time buyers, from a purchase price perspective, but the ability to repay the mortgage could be just as difficult due to rising rates.
the price trend
Regarding housing prices, they continue to rise in some countries, but are also falling in several others (whether there is a bubble or a collapse). The report indicates that sales of both new and used homes have plummeted in the United States and worldwide due to the sharp increase in mortgage rates since January.
For the past 10 years, near-zero interest rates have fueled a boom in housing prices. This revealed that properties had already become unaffordable for many buyers at the beginning of the year. Now, with mortgage rates nearly doubling, buying a home is even more out of reach for many.
According to data from May, US home prices rose 19.7% year-over-year, compared to a 20.6% increase in April. However, this is not a realistic reflection of what is happening in the housing market.
Real estate, unlike the stock market, is relatively illiquid and it takes time for a downturn to lead to lower housing prices, according to the publication idealista.com.
When buyers decide to stay in their homes, prices don't immediately drop. Instead, business slows down and the number of transactions decreases, as has already been observed. In an attempt to sell, property owners then lower their asking prices after a few months: another phenomenon already being seen worldwide.
But houses aren't selling because buyers are staying away; in fact, when houses aren't selling, many sellers can take them off the market if they're not in a hurry to sell. This results in fewer houses for sale and fewer transactions.
However, housing prices plummet when bargain sellers become forced sellers because mortgages are no longer affordable or for other economic reasons. The longer the recession or rising interest rate cycle lasts, the more likely this is to happen.
Source: Real Estate Data
