Compass agents said they predict demand for urban living, condos and shared amenities to increase in 2023.
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More than 85% of Compass agents surveyed said they predict a balanced national housing market or one tilted in buyers’ favor in 2023.
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Compass agents said they predict markets in the Southeast to be the most likely to outperform national sales volume and price growth averages in 2023.
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National sales volumes are predicted to decline from 2022. Prices are predicted to stay roughly the same or fall modestly, and inventory is forecast to grow.
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Agents said they predict typical mortgage rates to end 2023 in the 5%-6% range, down from recent highs exceeding 7%.
NEW YORK, NY, DECEMBER 21, 2022 — The pandemic-era trend of home sellers holding a firm advantage over buyers is predicted to reverse in 2023, with the market potentially leaning in buyers’ favor for the first time in years, according to a survey of more than 440 Compass (NYSE: COMP) real estate agents nationwide. Real estate agents at Compass, the nation’s largest residential real estate brokerage by sales volume[^1], also said they predict condos and urban living to grow in popularity as the pandemic continues to fade and cities regain their luster.
The U.S. real estate market in the first half of 2022 largely picked up where the historically strong 2021 left off, with high sales volumes, rapid annual price gains and rampant competition for available homes. But the second half of 2022 was characterized by overall economic volatility as the Federal Reserve hiked benchmark interest rates at a record pace to fight high inflation, which significantly dented housing affordability, dampened demand, and led to declining sales volumes and slower annual price growth.
“In 2023, we may see a mirror image of 2022 – a somewhat trying first half that gives way to a surprisingly strong back half of the year,” said Compass Chief Evangelist Leonard Steinberg. “The would-be buyers that stepped back from the market in late 2022 can’t and won’t stay away forever, especially given the competing demands from first-time buyers looking to get into the market and retirees looking to move or downsize. In a world that’s in the midst of an energy crisis, smaller, more-efficient living will grow in appeal across all segments – from entry-level to ultra-luxury.”
Steinberg continued: “Under-building is also likely to remain a challenge across all market segments as builders grapple with the challenge of balancing a short-term decline in demand with the long-term need for more new housing. People everywhere need to buy and sell homes every day, and these buyers and sellers will show up to compete throughout 2023 and beyond, as the market continues to re-balance and normalize.”
Key takeaways from the survey reveal:
The rapid market slowdown of the past six months is predicted to largely level off in 2023.
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Almost two-thirds of respondents (62%) said they predict there to be somewhat or much fewer U.S. home sales in 2023 compared to 2022.
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68.3% said they predict annual U.S. home price growth to decline only modestly or stay about the same as in 2022.
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A majority of agents said they predict both housing inventory (71.5%) and rents (75.8%) to stay at roughly current levels or increase somewhat.
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61.6% of respondents said they predict typical mortgage interest rates – which more than doubled from about 3% at the start of the year to more than 7% by late 2022 – to end 2023 between 5% and 6%.
The market’s balance of power is predicted to shift towards buyers.
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A large majority (86.6%) of Compass agents surveyed said they predict a balanced national housing market or one tilted in buyers’ favor in 2023.
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Only about 1 in 8 (13.4%) respondents said they predict a decent or strong seller’s market.
First-time home buyers are likely to continue to struggle as more experienced buyers drive the bulk of market activity in 2023.
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Almost three-quarters of respondents (74.6%) said they predict the share of first-time buyers to stay about the same or decline next year. Just 26% of all buyers were first-time buyers in 2022, according to the National Association of Realtors (NAR), a record low.
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Alternately, a large majority (80.8%) said they predict the share of buyers aged 55-74 to stay the same or rise next year. The share of buyers in this age group rose to a record high of 42% in 2022, according to NAR.
Urban living, condos and shared community amenities appear poised for a comeback in 2023 after being sidelined by pandemic concerns and needs for more space.
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The number of respondents that said urban living would grow in popularity in 2023 relative to 2022 was 44.1% higher than the number that said urban living would fade in popularity.
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The number of respondents saying shared community amenities – community centers, pools, tennis/pickleball courts, etc. – would grow in popularity was more than triple the number that said such offerings would fade in popularity.
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The number of respondents saying large yards would fade in popularity was 49.1% higher than the number that said they would be more popular.
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59.1% of survey respondents said they agreed somewhat or strongly with the following statement: “As affordability challenges continue, the pandemic fades, cities regain their luster and more companies begin to require employees to return to the office more regularly, condos will experience a resurgence in popularity in 2023.”
Markets in the Southeast are most likely to outperform national averages.
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The Southeast was the only region (out of 8 total) where more respondents said they predicted both sales and price growth in local markets to outperform the nation than said the opposite.
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More respondents said sales volumes in markets in the Southwest and Pacific West regions were more likely to outperform national benchmarks than not, but that price growth in those regions was more likely to be in line with the nation.
“As the market normalizes, we expect the population in the Southeast to continue to grow, fueled by a tax-friendly environment and opportunities for job growth," said Jeff Polashuk, Compass’ regional vice president for Florida. "This continued demand will position the Southeast for another decent year.”
Survey respondents were more bullish on their local markets’ anticipated performance in 2023 than the national market as a whole.
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22.5% of respondents said they predict sales volume in their local area to grow in 2023 from 2022, compared to just 15.9% who said they predicted the same trend nationwide.
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79.6% of respondents said they predicted national home prices would stay the same or decline in 2023, while 68.5% said they predicted local prices would stay the same or grow.
Survey Methodology
Compass surveyed 443 agents online between December 5, 2022 and December 16, 2022 across all markets in which Compass operates. The survey was designed, fielded and analyzed by Compass. While all Compass agents were given an opportunity to participate, the survey results may not be representative of the views and predictions of all Compass agents – and survey results may be subject to certain biases. All forecasts, views and statements included in this press release, other than historical statements about Compass, are based on the results of the survey.
Cautionary Note Regarding Forward-Looking Statements
Statements contained in this press release that refer to future events or other non-historical facts are forward-looking statements that reflect Compass' current perspective on existing trends and information as of the date of this release. Statements containing words such as "predict," “predict,” “forecast,” "will," or similar expressions constitute forward-looking statements. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from Compass' current predictions depending upon a number of factors affecting Compass' business, including, but not limited to, expansion into new markets, prevailing market conditions, the impact of general economic, industry or political conditions in the United States or internationally, and risks related to the impact of the COVID-19 pandemic. The foregoing list of risks and uncertainties is illustrative, but is not exhaustive. For information about other potential factors that could affect Compass' business and financial results, please review the "Risk Factors'' described in Compass' Form 10-Q for the quarter ended September 30, 2022 filed with the Securities and Exchange Commission (the "SEC") on November 14, 2022, and Compass' other filings with the SEC. Except as may be required by law, Compass undertakes no obligation, and does not intend, to update these forward-looking statements after the date of this release.
