Introduction
The real estate market faced one of its most challenging years in 2022, with rising mortgage rates, declining home sales, and weakened buyer confidence. However, according to Compass CEO Robert Reffkin, who appeared on CNBC on Monday, the worst is behind us. He stated that the fourth quarter of 2022 (Q4 2022) represented the bottom of the housing market cycle, and provided six strong reasons to support his claim.
For anyone considering buying or selling a home, understanding these insights is crucial to making smart moves in 2023 and beyond.
6 Reasons Why Q4 2022 Was the Market Bottom
1. A 25% Increase in Weekly Mortgage Applications
One of the clearest signs of renewed activity in the housing market is the 25% jump in mortgage applications. This surge reflects improving buyer sentiment, as more people are ready to re-enter the market despite lingering economic uncertainty. A rise in mortgage demand usually translates into increased home sales in the months ahead.
2. Mortgage Rates Dropped to a 4-Month Low
After peaking in 2022, mortgage rates began to trend downward, reaching a 4-month low by the end of the year. Lower interest rates make homeownership more affordable, allowing more buyers to qualify for loans and encouraging hesitant buyers to make a move. This decline has already started stimulating fresh activity in the market.
3. Growing Buyer Interest and Stronger Open House Traffic
According to Reffkin, there has been a noticeable increase in buyer interest, with more open house traffic and more offers being submitted. These are classic indicators that demand is rebounding. For sellers, this suggests that listing a home in 2023 may attract more attention and competitive offers.
4. Seller Concessions Reached a 10-Year High
In the last quarter of 2022, 42% of sellers were offering concessions to buyers at the closing table—a 10-year high. These concessions, which include help with closing costs or covering repairs, give buyers more leverage and make transactions more attractive. This willingness to compromise shows sellers are adapting to the new market reality.
5. Home Builder Sentiment Improved for the First Time in a Year
The homebuilding industry is often a bellwether for the broader housing market. After months of declining confidence, home builder sentiment improved in Q4 2022 for the first time in a year. This shift suggests that builders see stronger demand ahead and are more optimistic about future sales.
6. Pending Closings Stabilized After a Steep Decline
At one point in the fall of 2022, pending home closings were down more than 30% year-over-year. But by the end of the year, many markets saw pending listings nearly flat compared to the prior year. This stabilization is a strong signal that the market is finding balance after months of sharp declines.
What This Means for Buyers and Sellers
So, what does all of this mean for today’s buyers and sellers?
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For Buyers:
With mortgage rates easing, seller concessions rising, and more inventory available, buyers are entering a period of greater negotiating power. Now may be the time to lock in a favorable rate before the market heats up again. -
For Sellers:
Although sellers face more competition and must prepare their homes more carefully, increasing buyer activity and improving market sentiment mean there is new confidence in listing properties. Strategic pricing and strong presentation will be key to attracting motivated buyers.
Conclusion
The insights shared by Compass CEO Robert Reffkin suggest that Q4 2022 was indeed the bottom of the real estate cycle, and the housing market is now entering a more balanced phase. With lower mortgage rates, rising buyer demand, and increasing confidence from both buyers and builders, 2023 may present fresh opportunities for those ready to act.
If you’re considering making a move in the real estate market, now is the time to stay informed, prepared, and ready to take advantage of these shifting dynamics.
Watch the interview here!
