Realtors talk regional market trends, strength of the homebuyer, concessions

Realtors Kathy Casey, Dan O’Brien, and Sir Ashley Harrison sit down with Yahoo Finance Live to discuss the state of the housing market, some of the biggest trends they're seeing, investor activity, and predictions for 2023.

Video Transcript

SEANA SMITH: Well, it is a new year, and you may be interested in a new house. Mortgage rates have cooled demand for homes. The number of homes sold is down 37% from a year ago. That's according to Redfin data. We want to take a deep dive into housing markets across the country and take a look at Denver, at Indianapolis, and at Charlotte.

We have Kathy Casey, a Coldwell Banker residential brokerage realtor in Denver, Colorado, Dan O'Brien, realtor at Trueblood Real Estate covering Indianapolis, and Sir Ashley Harrison, real estate broker at the Harrison Group with Fathom Realty in Charlotte, North Carolina. It's great to have the three of you here. We want to jump right in and get to what you were seeing in your respective regions. We're going to go around the horn pretty quickly. Kathy, let me start with you. What are the trends? What are you seeing in Denver?

KATHY CASEY: So, Denver, our market is cyclical. So typically, the spring market starts in January. So we are already starting to see signs of the spring market, showing that it may be a heated market. In December, the market was kind of slow, and buyers really were taking their time. They were able to really pick and choose what they want. And they were asking for seller concessions and the contingencies that they haven't had the luxury to be able to ask for in the last couple of years.

SEANA SMITH: Dan, what about you? What are you seeing in Indianapolis?

DAN O'BRIEN: Yeah, things have certainly slowed down since the craziness of the COVID market, right? So things are lasting a little bit longer on the market. Days on the market is up. But the median sales price is still up 9% or so year over year. But buyer demand has certainly slowed down with those rising interest rates.

And so it's one of those things where we've been seeing new listings coming on the market. But they just take a little bit longer. And the question, like you were talking about, is, do buyer-- or do sellers reduce the price? Do they play the waiting game? So we anticipate still a busy year this year. And time will tell to see what happens.

SEANA SMITH: Sir, how does this compare to what you're seeing in Charlotte?

SIR ASHLEY HARRISON: Pretty similar. We're seeing more inventory, but less new listings, and buyer demand has fallen off. And we are getting a lot more seller concessions, but pricing has remained very sticky.

DAVE BRIGGS: Sir, we want to stay with you because we mentioned the top 10 markets all basically in your region. North Carolina is on fire. What do you make of it? What makes North Carolina such a perfect storm for real estate markets right now?

SIR ASHLEY HARRISON: Well, affordability. You named it earlier in the segment. Affordability is the driving point, and a lot of industry is coming to the Carolinas, and North Carolina, in particular. Just this past year, North Carolina was ranked number one by Wall Street Journal as the number one place to do business. So I think that's the main driving point.

SEANA SMITH: Kathy, when you take a look at Denver's housing market, it's incredible, taking a look at the prices, because they have certainly exploded. They're up 30% when you compare it to the levels that we saw back in March 2020. What is that doing for demand? And I guess, where do you see prices headed? How long until they really come back down?

KATHY CASEY: So our prices luckily have been pretty much holding steady. I mean, we lost about 5% since the interest rates started to have that uptick. But the prices are still holding steady because inventory is still low. So for buyers, this is a great time because now the lines are not as long for you to get into a house. So you can get into a house much easier than you could months ago.

And we have a saying in our industry that is date the interest rate, marry the house. So go out, find a house that you like and you love, and then wait till you can get an interest rate that's more-- for 30 years, that's going to be more appealing to you.

DAVE BRIGGS: The inventory story has been bleak across the country at best. However, not necessarily the case in India. What are you seeing there, Dan?

DAN O'BRIEN: Yeah, so I mean, year over year, we're down about-- or we're up 75% from this time last year. However, to put that in perspective, we just now broke the number where it was pre-COVID. So before March 2020, when the market went crazy, we're just now getting back to then. And at that time, we were talking about low inventory anyways. So a lot of people talk about the last 6 to 12 months, but putting it in a big picture view, we are still low in inventory. It is technically a seller's market. But things are looking pretty good leading into the year.

SEANA SMITH: So you're right in the middle of one of the hottest housing markets, if not the hottest housing market. What are some of the tips for people who are interested in or maybe looking to buy in Charlotte?

SIR ASHLEY HARRISON: Yes, I say, right now, if you have been on the margins and could not get your offer accepted in the past two years, now is the time to move. Although interest rates are a little higher, you're not competing with as many people. So people-- the sellers weren't considering your offer. Now they will consider it, and they may offer seller concessions.

DAVE BRIGGS: Concessions have been a theme across the country, just like low inventory. Redfin says 42% of home sales in the fourth quarter gave concessions. Kathy, what type of concessions are sellers forced to offer right now?

KATHY CASEY: Right now, sellers are operating to help with the interest rate increase. So they are offering 2-1 buydowns. And if you don't know what that is, basically, what that means is, for the first two years, your interest rate would be lower than what-- lower at the market rate right now, the current market rate. So they're offering that. Typically that costs somewhere between 10,000 to 20,000, depending on how deep they want to cut the interest rate.

And that's what's really helping buyers really get into the houses that they want, too, because affordability is key here in Colorado. Our-- just to give you some perspective, our home prices have doubled in the last 10 years. And so wages just can't keep up with that. So, anything to help the buyers get into the house is what sellers are doing right now.

SEANA SMITH: Dan, what about concessions in Indy? Is that something that's becoming more and more popular, and what are people offering?

DAN O'BRIEN: Yeah, same thing here. People are getting creative with the mortgage lending. Different banks are offering different types of mortgage products to help with that increased mortgage rate. Also sellers, again, similar, are offering a credit for a 2-1 buy down, or just in general, to buy down the interest rate to make that more affordable for a buyer. Now, we actually have buyers that are being protected by contingencies, like inspection and appraisal, where a lot of times, those were out the window during the peak craziness of the COVID market.

And so it's not getting too crazy or anything like that. But sellers are absolutely having to negotiate. Gone are the days of, hey, my next door neighbor just sold last year for $100,000 over list price. Things are still happening where there are some hot areas that are demanding multiple offers in a matter of days. But sellers are having to actually come back and come to reality with negotiating like they used to.

DAVE BRIGGS: Sir, what are you seeing in terms of concessions? And what, in this market, as we're coming out of COVID, really with a new dynamic, what's the number one thing you recommend that helps move a house today?

SIR ASHLEY HARRISON: Yeah, thank you for that. The concessions I see are paying for closing costs and to buy down the interest rate right now. And it really depends on the loan the buyer's getting and how much concessions they can ask and seek from the seller. The main thing I think buyers can do moving forward is to, one, study the market, know exactly what's happening. Don't assume just because the market is totally different than last year. Study the market, but also surround yourself with trusted professionals. That's the biggest thing.

SEANA SMITH: Kathy, investor activity has been a huge story when it comes to housing. A lot of the pricing being driven by the jump that we certainly have seen in investor activity. How much of that are you seeing in Denver?

KATHY CASEY: Well, I can tell you, I probably get a call-- at least three or four calls a day from investors wanting to know if I have anything off-market that they can fix up and flip because it's really that tight for investors right now to find anything where they're going to be able-- and pricing is kind of a guess-- and I don't want to say a guessing game, but you have to be really strategic. You have to really know how to price things.

So investors want to make sure they're going to be able to get that return on investment. So if they can't get it for a really just awesome price, then it's really not worth it to them because the uncertainty of the market has got them a little wavering in their decisions for investing into the market right now.

DAVE BRIGGS: Dan, what's the investment activity in the Circle City?

DAN O'BRIEN: Yeah, it's been very heavy. It's jumped from, I think, in 2020, it was about 8-- or 11% of the purchases were to investors. And 2022 is over 25%. So one in four houses is being sold to an investor right now. And you have some of these billion dollar companies, Tricon, BlackRock, all these people with billions of dollars, and they can park it into a hard asset like real estate.

And it's made it really difficult, especially for first-time homebuyers, to compete with these all cash, no inspection, no appraisal offers. And it's also made it difficult for the rental market as well. Rent is up, gosh, 20% year over year. And so it's been a really difficult thing to combat how do you-- can you create laws to prohibit some of these big billion dollar companies from doing it, but not impede on individual rights for people that want to own investment properties as financial planning. But investment has definitely been a difficult topic here recently.

SEANA SMITH: Yeah, certainly amazing to really take a look at the uptick in activity. We want to go around the horn once again, quickly just get your thoughts. Sir, first to you, your top prediction for the housing market this year.

SIR ASHLEY HARRISON: I think interest rates will come down to the low fives, but it will be harder to get a loan. And it's going to, at least in my area of the country, prices will level off, but tend upward.

SEANA SMITH: Kathy?

KATHY CASEY: So I predict that we have about 90 days of this interest rates will still be kind of maybe even on the uptick, and then I think that they will come down as well. And I believe that our prices will continue to hold. And so if you're looking to buy, don't wait because you want to get out there before the rest of the market jumps back in that's been on the sidelines.

SEANA SMITH: Dan, you got the final word. Your top prediction for 2023.

DAN O'BRIEN: Yeah, very similar. So I think mortgage rates will level off, come back down towards the end of the year. Buyer activity will then pick back up. I don't anticipate any kind of decrease in value, anything like that. Maybe plateau, but normalize back to a normal level.

DAVE BRIGGS: All right, Dan O'Brien, Kathy Casey, Sir Ashley Harrison, nice to have the latest from Indianapolis, North Carolina, and my hometown of Denver. Thanks to all of you.