Real Estate Expert Jonathan Miller
New York appraiser Jonathan Miller has written about US real estate for more than 25 years.
He told Insider that prices this year will disappoint both buyers and sellers.
He says it will take a few years for the supply of older homes to grow enough to really move prices.
The horror movie for prospective homebuyers isn't over yet.
Yes, the housing market has come off the boil thanks to a steep increase in interest rates, and prices have slipped from their highs. But compared to a few years ago, housing seems far less affordable.
"Prices across the country are still much higher than pre-COVID or pre-pandemic even if they've come down a little bit," said real estate appraiser and consultant Jonathan Miller in a recent interview with Insider. He noted that the rate hikes "cooled off demand but not prices because the inventory variable is behaving differently than it typically does."
Miller co-founded his New York-based firm Miller Samuel in 1986, and it appraises about $5 billion in New York City-area properties every year. Miller himself has written housing market reports for the real estate firm Douglas Elliman for almost 30 years, tracking real estate sales in Southern California, Florida, Boston, and other major markets.
He said the problem is that mortgage rates were at historic lows from the era of the 2007-08 Global Financial Crisis until barely a year ago. That means a huge chunk of homebuyers are benefiting from rock-bottom rates and don't want to sell or move, because buying a new home would involve paying a much higher rate.
They might also get a less than ideal price on their home. And when people aren't satisfied with the offers they're getting on their homes, they tend to stay put.
Disappointment ahead for homebuyers and sellers alike
Miller said that combination of a slightly weaker market starting from much higher price points might just leave everybody feeling unsatisfied.
"I call 2023 'The year of disappointment," he said. "Sellers aren't going to get their 2021 price, and buyers aren't going to get a big discount."
That long period of low rates, followed by a boom in home sales after the pandemic started, severely reduced housing supply. Miller said that's created a logjam that won't clear out for years — but over time people will move for jobs, or decide they need bigger homes for their families, and the supply of homes for sale will get back to a more typical level.
"It's going to take a while for that bond to be weakened, and it'll be weakened by personal needs," he said. "The more time that goes by, the more supply that we will see come into the market as consumers make a move for whatever reason, as opposed to just a discretionary purchase."
And over time, potential buyers will get used to rates in their current 6% to 7% range, instead of comparing it to the 3% and 4% rates of the recent past.
Until then, Miller says a real correction in housing prices is unlikely because the shortage of homes for sale will keep prices from falling too much. He contends that ultra-low mortgage rates ultimately made homes less affordable for a lot of people because of what happened to the housing supply after rates went up.
If not for that, he said, the market would probably be behaving in a more traditional manner — the way prospective buyers hoped — where higher rates would bring prices down in a more direct and dramatic way.
At the moment there isn't much that frustrated buyers can do aside from being patient. Miller says that this isn't the first frustrating cycle for prospective buyers, but they've always been followed by opportunities.
"In every down cycle, consumers throw up their hands and say 'I'll never be able to afford a house,'" he said. "It's true for some, but it's not true for everybody."
Source: Business Insider
