By Kevin Haas
Rock River Current
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ROCKFORD — The Rockford region’s real-estate market has gone through back-to-back record-breaking years with high sale prices and homes moving off the market at breakneck pace.
So what will 2023 hold?
Below is the forecast from the NorthWest Illinois Alliance of Realtors, which provided the 2023 outlook during a news conference this week in which the 2022 year-end data was also released.
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We’re also looking back on the predictions the group made at the start of 2022 to see how it fared.
Mortgage rates will fall
The average long-term mortgage rate reached a two-decade high of 7.08% in the fall as the Federal Reserve continued to raise its key lending rate to try to combat inflation.
The 30-year rate recently fell to 6.15%, and Realtors expect it will continue to decline throughout the year.
But don’t expect to see rates as low as this time a year ago, when the average rate was 3.56%.
“It’s obviously becoming a little more attractive for homebuyers out there who are looking to finance,” said Conor Brown, CEO of the NorthWest Illinois Alliance of Realtors. “We do expect to see those trend lines decline in 2023. Especially look toward the second half of 2023.”
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The Realtors group expects rates will decline and end the year below 6%, but that largely depends on what happens with inflation in the year ahead.
Home sales will be moderate again
Total home sales in the region fell nearly 13% in 2022 as record-low inventory and higher mortgage rates throttled the real estate market.
There were 4,578 properties sold in Winnebago, Boone and Ogle counties last year, falling from 5,253 in 2021. It was the lowest annual sales in five years, and Realtors say if mortgage rates stay high home sales could be even lower in 2023.
Inventory crunch continues
Sellers will continue to have the upper hand in the housing market in 2023, Brown said.
The region’s inventory of homes on the market is expected to remain low with no significant housing construction on the horizon. That’s largely because rising material costs make it difficult to build and still offer a competitive price in this market, said Kevin Horsman, a Realtor and member of NorthWest’s board of directors.
“You don’t want to build a 2,000-square-foot house that you have to put on the market for $400,000,” he said. “It’s not going to sell because there’s beautiful other homes, not new, that are available.”
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Homeowners who locked in a low mortgage rate may also want to stay in their house rather than upgrade and pay a higher rate.
“We can’t really build our way out like we would normally,” Brown said. “Additionally, with some of the higher interest rates it’s keeping some folks still in their current homes.”
Smaller price growth
After back-to-back years with record-breaking sale prices, Realtors expect things to cool off.
“That’s OK. It’s Ok to have a little bit or a breather,” Brown said. “That’s still a positive sign for home sellers as well as buyers looking for a little more predictability.”
Home price appreciation will vary by market, and it could vary even within submarkets of the Rockford region.
The biggest factor for each area will be supply and demand, Brown said.
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Last year’s expectations
The Realtors’ group was mostly on target when it made its predictions at this time a year ago.
In January 2022 Brown stood up in a similar news conference and correctly forecasted that the inventory crunch would continue, there would be an even quicker pace to home sales, mortgage rates would rise and that the Rockford region would remain a seller’s market.
The only missteps were that the group thought 2022 would bring more first-time homebuyers to the market.
But first-time homebuyers were often shut out of the market by investors who could take advantage of the low mortgage rates and the rent the properties.
“I think that’s stabilized a bit as interest rates have gone up a little bit,” said Ginger Sreenan, president of the board of directors for NorthWest.
Even with rates rising, she said buyers can still find affordable rates. First-time buyers also may be able to access grants or other assistance.
“Interest rates are still affordable compared to when I bought my first home in 1980 and had doubled digit interest rates,” Sreenan said. “This is still a great time to purchase a home and build a nest egg.”
U.S. homeowners have a net worth about 40 times greater than renters, according to data from the Fed. A homeowner’s net worth is about $255,000 vs. $6,300 for a renter.
Homeowners, “it is really a great pathway for wealth generation,” Brown said.
This article is by Kevin Haas. Email him at firstname.lastname@example.org or follow him on Twitter at @KevinMHaas or Instagram @thekevinhaas