20 young real-estate leaders forecast what’ll happen in 2023, from home prices finally dipping to the rise of the South

Matt Barnett, senior associate architect with LS3P 

In 2023, the Southeastern states are likely going to experience more growth than any other region in the country. But this growth will very likely continue beyond the next 12 months, Barnett, an architect focused on affordable housing and innovative development, told Insider.

The influx of residents will force these quickly growing states — North Carolina, Georgia, and Florida, for example — to invest in spaces and places in a different way, he added. This means sustainability and equity are set to be at the forefront of development.

Additionally, the growing population in the South could lead to some unique challenges, he said.

“The South has a lot of challenges that other areas of the country don’t necessarily have in terms of culture, politics, equity, and history with the Civil War,” he said. “All of these things are going to confluence in this population boom, and there’s going to be growing pains.”

Christie Chen, director of investments at Oxford Properties

Investors in commercial real estate who want to stay competitive next year will need to think outside the box and remain diligent in seeking good deals, Chen said.

2022 was a brutal year for commercial real estate, with property values declining by more than 13%, according to data from Green Street, a firm that analyzes real-estate data.

Popular commercial sectors like life sciences — a growing research field that touches on multiple industries, from academia to pharmaceuticals — saw a 33.6% decrease in investment activity in 2022, for instance. But the top-line figures don’t tell the whole story, Chen said.

Chen told Insider she expected some interesting opportunities in the next six to 12 months for investors “willing to be creative and agile.” In other words, she is suggesting there may be some opportunities for developers and investors to work out deals with incentives or concessions should the market continue softening.

Markets like Raleigh-Durham, North Carolina, and San Diego could become the next big thing for institutional investors since they have a high concentration of academic-research institutions and highly skilled workers, according to a report by the commercial brokerage Newmark.

Gaurav Dhume, finance lead at Darwin Homes

Real-estate investors remain gripped by uncertainty after the fastest series of interest-rate hikes in recent history. Expect that uncertainty to continue through at least half of 2023, Dhume told Insider. Right now, institutional buyers of single-family homes are mostly on pause as a result, but Dhume said he expected them to bounce back at some point next year.

Today, large investors own about 3% of the roughly 20 million single-family rentals in the US, according to an estimate from Roofstock. As interest rates continue to rise, retail buyers who rely on debt will likely be pushed out of the market by higher borrowing costs. Cash buyers and institutional investors with access to cheaper debt will be the winners as a result, Dhume predicted.

Institutions are also poised to grow their single-family-rental market share over the coming years as the largest investors, such as pension funds, allocate more money to single-family rentals over other real-estate asset classes, such as office or retail, Dhume said.

“With respect to SFR, the institutionalization of the space is going to continue,” Dhume said. “That’s not going to change.”

Stephanie Douglass, cofounder of Open House Austin

Douglass, a cofounder of Open House Austin, a brokerage focused on first-time homebuyers, is optimistic about the 2023 housing ecosystem, as it will be the most “normal year” since 2019, she said.

Contrary to predictions from many economists, she foresees order returning to the housing market as the inflation rate is poised to cool. With less pressure on the economy, she said mortgage rates would likely retreat to about 5%, which she said was “doable for more buyers.

“I have a pretty hopeful and positive outlook for 2023,” she said. “I believe we’ll see a leveling out of mortgage rates, ideally lower than where they are now.”

With lower rates, homebuyers will return to the market, Douglass said, ultimately keeping home prices elevated.

“I think home prices will stay steady in 2023, and we’ll either see a flat line of appreciation or a slight increase in prices,” she said. “I don’t see home prices falling nationwide.

“There will be cities that see prices fall — such as Austin, Raleigh, or Phoenix, cities that saw truly wild growth — but I don’t think we’ll see more than a 5 to 8% price decrease even in pandemic boom cities.”

John Andrew Entwistle, founder and CEO of Wander

The venture-capital firm NFX said in September that proptech was on its third cycle: the ownership revolution. And Entwistle could not agree more.

The first iteration of proptech — the information stage — has passed with companies like Zillow essentially creating databases for homes. The second stage, which focused on transactions, birthed many companies promising a streamlined process for buying and selling a property. Now we could see the traditional homeowner change form in 2023.

“We’re starting to blur the lines between users and owners,” Entwistle told Insider. “I think when you can do that, you’re able to create community and really change real estate from these isolated fragmented assets into these larger pieces of a platform.”

Entwistle’s company, Wander, is joining what he calls a “revolution” in the ownership of property.

Wander — which owns a slate of luxury vacation-rental properties designed for remote workers and equipped with workstations and Teslas — now allows users the ability to co-own some of its vacation properties.

The relatively new model, called fractional ownership, allows people to buy shares or stakes in real estate for very reasonable prices — some for as little as $100. After that, co-owners can either visit the properties for a set length of time proportional to their ownership stake or reap a portion of rental revenue from being a co-landlord. At least 11 startups offer this kind of fractional investment opportunity, and Entwistle said he believes the model will remain popular through 2023.

“I think that it’s going to be extremely prevalent over the next few years,” he said.

Daryl Fairweather, chief economist at Redfin