Seth Fowler: Predicting The 2023 Real Estate Market in Tarrant County And Beyond With Four Simple Words

It’s that time again for your faithful Tarrant County Tuesday columnist to tell you all about the 2023 real estate market. Time to get your pen and paper ready, or make sure you have enough toner in your dot-matrix printer to print this article.

But first, a story.

Four Simple Words

Waaaaaay back when I was a young lad just learning to tie a bow tie, I liked to roam the 40 acres otherwise known as the University of Texas. Lots of fun was had in Austin and I learned a few things here and there … most of which were not for class credit, unfortunately.

Every year a man named Cliffe Knechtle would show up to campus and spend a few days in a populated location and invite discussion with students. I wouldn’t call him a street preacher because he didn’t preach or yell and scream at people, but he would invite anyone to have an open and honest discussion about their faith and beliefs, or non-beliefs, and pose questions to him regarding various topics.

As you can imagine, in a land bountiful with pseudo-intellectual types who liked to sit around and discuss whatever they pleased, Cliffe was a popular visitor to people of all backgrounds, beliefs, and walks of life.

I don’t recall many of the discussions because most of the time I would be walking to another class (obviously I had 100 percent attendance during college) but Cliffe did repeat a phrase that has stuck with me for over two decades, and it is what I’d like to share with you as the four words to predict the 2023 real estate market.

I feel like there should be a drumroll before I share these magical words.

With no further adieu, here are the four words.

“I … do … not … know.”

Boom. Mic drop. Lights out. See you in 2024.

Yep, that’s it. Those are Cliffe’s four perfect words he would tell students when he didn’t know an answer to a question or why something is the way it is. I do not know. And that’s all you need to know about the 2023 real estate market in Tarrant County and North Texas — and probably the entire country.

This Time Last Year

If we could get in a time machine and go back to Jan. 1, 2022, do you think anyone would believe that interest rates would be in the 7 percent range in 12 months? Do you think anyone would believe you if you said, “The real estate market will be busier with soaring prices and crazy six-figure offers over asking price for the first six months of 2022 and then will dry up with record lows in sales and closings the last six months of the year”?

We all would’ve had a good chuckle. We all knew inflation would come into play eventually after the Federal government started printing money left and right in 2020. We knew mortgage interest rates couldn’t stay in the 3 to 4 percent range forever.

But did anyone really think there would be a month in 2022 where the rate would go from 5 to 6 to 7 percent in a matter of days? Did anyone think that new home sales companies would go from putting names on a waiting list for future buyers to throwing crazy incentives at buyers on completed homes if they could close by the end of 2022?

But all of that did happen. What a roller coaster of a year it was. Records were broken in both positive and negative directions for new and existing homes. It was a mad scramble at times to even find a home to buy much less win the deal and buy it.

That Was Then, This is Now

And now we have the opportunity to look into the future of this crazy world and predict what it will be like in the coming months. This takes us back to Cliffe’s four words:

I do not know.

Here’s another secret: not only do I not know, but no one knows. Scared? We all should be a little scared, but we all should be a little optimistic, too.

There is so much volatility not only in our state and our country but also across the globe right now that will affect the local real estate market in 2023 and beyond. It appears that China still hasn’t learned that COVID is a virus and will always be around and to get over it and take flu medicine and move on. When that country shuts down, or even slows down, that is bad for the rest of the world.

Gasoline prices in 2022 doubled at times which threw a wrench into everyone’s budget and plans. Not only gas increased but food and basic living necessities. If those in Washington don’t allow legitimate ways to access energy resources then prices are only going to continue to increase.

There continues to be a scuffle between Russia and Ukraine and that not only takes a toll on human collateral but directly affects food and energy supplies to many nations and continents.

No one knows anything.

Will interest rates go up? Decline? Stay the same? I don’t know, and truthfully, neither does anyone else. Certainly, smart people can make assumptions based on knowledge, history, and research, but in an era where the United States seems to be waging an economic war on other nations in order to keep our own currency as the de facto standard, who knows where inflation will go and what the Fed will do with interest rates?

What We Need For 2023

All hope is not lost. While 2023 definitely will NOT be like 2022, or at least the first six months of 2022, for real estate, there still are signs that a balance in the market (pricing and inventory) will help make more homes affordable to more people.

What we need in 2023 is for interest rates to stabilize. Whether it’s at 4, 5, 6, or 7 percent, the rate needs to land and stay there for a while. The panic and volatility come when the rate jumps from one number to the next in days — or even hours.

Home prices need to come down. This could take longer than a year, but there has to be a market for first-time buyers and single-income buyers. When a first-time home starts in the upper $300s or low $400s that’s not sustainable.

We know renting is just flushing money down the toilet, and rental rates are sky-high as well. When a young professional is spending too much money on a rental and not saving anything for a down payment on a home, that is a bad cycle that is difficult to get out of.

Inventory of homes, both existing and new, needs to continue to hit the market. Currently, there is around a two-month supply of homes in Tarrant County. That is as high as it has been in years, but a balanced market is when there are six months of inventory on the market at a time.

Those are things I do know and things that should happen in 2023.

Other than that, I do not know.