As we head into a New Year, builders need to keep a close eye on market conditions and trends, as the economy is fluctuating constantly. Will the New Year bring an uptick in residential building? What demographic will be most likely to buy and sell in 2023? Some new research points to interesting trends for the year ahead.
HomeLight recently published its Top Agent Insights Report for New Year 2023, which surveyed more than 1,000 real estate agents. The consensus is that there is an affordability crunch amid economic uncertainty in today’s market conditions, which is requiring buyers and sellers to adapt their expectations and behaviors. In fact, the survey suggests two segments of buyers are changing their behavior more than others: retirees and first-time homebuyers.
With the current market conditions, many retirees are deciding to put their original moving plans on hold, as they are particularly sensitive to inflation, as it erodes their spending power. In fact, the report suggests 59% of retirees will delay plans to sell and will remain in their current homes.
Other retirees will look to sell and downsize (55%), some will change where they plan to retire due to higher costs (42%), and a few will adapt their homes to age-in-place (39%).
Interestingly, nearly a quarter plan to adapt their homes to invite their children and/or grandchildren to live with them—both to save money and help their kids save money to eventually purchase their own home.
First-Time Homebuyers Adapt
Similarly, first-time homebuyers are changing their behavior as well, as they adapt to the current market conditions. While first-time homebuyers can be any generation, many are in Gen Z—or as I call them Screeners—which is currently on the cusp of purchasing homes for the first time.
The majority (67%) of these buyers are looking for more affordable areas, while many (54%) will increasingly use rate buy-downs to secure a lower interest rate. Many (45%) will also look for smaller or older homes.
The Year Ahead
The bottomline is the year ahead looks challenging for sellers—and builders need recognize the market trends ahead to provide the homes needed.
The survey forecasts we will see higher inventory during the market slowdown. Nearly half of top agents (48%) are predicting larger or move-up single-family homes will unlock first in 2023, followed by new construction homes (37%), allowing older millennials and growing families to finally get a foot in the door after months of uncertainty.
More than a third (36%) of top agents predict starter homes will become more available in the new year—but affordability will still prevent first-time buyers from taking advantage.
Builders Move Forward
For builders, this means also adapting to market changes, and the survey suggests focusing on two key areas: kitchens and bathrooms. Agents anticipate buyers will be drawn to a much simpler trend in 2023, with more than 84% of agents reporting buyers still prefer to see light and white color schemes in the kitchen.
Further, bathrooms that are both modern and functional with spa-like qualities are likely to help a house sell in 2023, with 64% of agents saying a double-sink vanity will be the single most popular feature. I would add affordable home technology and sustainability features could provide long-term value for homeowners looking to save money in the long run.
The bottomline here is 2023 is going to be a difficult year for selling and buying homes but keeping updated on the latest trends will help keep both buyers and sellers happy. The final thought is that if builders or contractors continue overcharging for services we are going to see a real disconnect in the market and a lack of equity. I have already seen it with the Living Lab. Excessive price hikes, labor gouging, and trades inconsistently showing up to jobsite just might lead to consumers demanding the market correct itself.
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