Today, sales and marketing firm Urban Pace provides three predictions for how the new condo market will evolve during the rest of the year.
Inventory Will Remain Low
While more consistent mortgage rates will instill more consumer confidence, the increased cost to own a home will still dissuade many owners from looking for a new home. This will keep inventory off the market and maintain upward pressure on pricing even as affordability may have eroded for many buyers. The pandemic and its accompanying effects interrupted the condo pipeline in 2020 and 2021. Disruptions to the supply chain, increased construction costs, and economic uncertainty killed or delayed numerous developments. Several condo projects that started selling during the first year of the pandemic converted to rentals when slow presales and climbing costs changed the math on profitability.
Low inventory in new construction and resale may help the condo market correct, as it will keep pricing high and increase absorption for standing inventory as there are relatively few options for buyers to choose from, even with less buyers in the market.
Mortgage Rate Increases Will Slow
Given the number of variables that factor into the Fed’s rate increases, predicting future rate changes is difficult, but the most recent rate hike was the smallest adjustment since March and inflation has eased meaningfully. Experts are generally in agreement that mortgage rates are past their peak. Goldman Sachs projects that the 30-year fixed rate will end 2023 at 6.5%, Freddie Mac forecasts it to end at 6.2%, and the Mortgage Bankers Association expects to see it at 5.2%. Continued signs of inflation stability and economic recovery could lead to a quick decline in rates and increased sales activity.
A (Modest) Return to Presales
Lower inventory levels will limit the choices of buyers and lead some to consider presales at new construction projects. We predict that buyers will be willing to commit to a purchase 6 to 12 months before delivery once the economy shows continued signs of recovery and mortgage rates begin to decline. This will help new projects achieve more presales than in 2021 and 2022, but still fewer than in previous years. Consumer demand remains focused on immediacy, so developers will need to find ways to meet that demand with smaller developments that can pencil with fewer presales.
Thumbnail image of a condo at Kite House.
See other articles related to: dc new condo market
This article originally published at https://dc.urbanturf.com/articles/blog/three_predictions_for_the_new_condo_market_in_2023/20817.
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