The housing market is a complex and dynamic industry that is constantly evolving. While the future is unpredictable, current trends can provide insights into what we can expect in the housing market in 2023. In this article, we will discuss the key trends that are expected to shape the housing market in the coming years, along with the potential impact of each trend. The housing market is predicted to slow down further in 2023. For sellers, this could be terrible news, but for buyers, it's great.
Yet, there is still the problem of sky-high mortgage rates. The bright side is that if buyers hold off, the supply of homes will increase, putting further pressure on sellers to decrease prices. This would constitute a long-overdue course correction for the housing market. Mortgage rates are skyrocketing. Home sales are declining. Supply is improving. We are witnessing a sharp slowdown in the housing market due to higher mortgage rates.
Trend #1: Increasing Demand for Affordable Housing
The demand for affordable housing is one of the most pressing issues in the housing market. The rise in housing prices, combined with stagnant wages, has made it difficult for many individuals and families to find safe and secure housing. In 2023, it is expected that access to affordable housing will continue to be a challenge. Innovative solutions will be necessary to address this issue and provide affordable housing options for those in need.
Trend #2: Shift toward Suburban and Rural Areas
The COVID-19 pandemic has caused many people to reevaluate their living arrangements, with larger homes and more space becoming increasingly important. This shift in priorities could result in a greater demand for housing in suburban and rural areas, leading to higher prices. This trend is expected to continue in 2023, especially as remote work becomes more prevalent.
Trend #3: Rising Home Prices
Despite the economic impact of the pandemic, housing prices have continued to rise due to limited supply and high demand. While this is good news for homeowners, it could make it more difficult for some individuals to enter the housing market. The trend towards rising home prices is expected to persist in 2023, particularly in urban areas where the supply is limited.
Trend #4: Stricter Mortgage Standards
As the economy recovers and interest rates rise, mortgage lenders may become more cautious about who they lend to. This could make it more difficult for some individuals to qualify for a mortgage and realize their dream of homeownership. Stricter mortgage standards are a potential barrier for those seeking to enter the housing market.
Trend #5: Increased Investment in Technology
The pandemic has accelerated the adoption of technology in the real estate industry, with virtual home tours and digital transactions becoming more common. This trend is expected to continue in 2023, with technological investments helping to streamline the home buying and selling process. The technology could also play a role in addressing the challenge of affordable housing, with innovations such as modular homes and 3D printing.
Hence, the housing market in 2023 will be shaped by economic, social, and technological factors. While predicting the future is never easy, understanding these trends can help individuals and policymakers make informed decisions about the housing market. It is important to address the challenge of affordable housing, as well as the potential barriers to homeownership such as rising home prices and stricter mortgage standards. Technological innovations are also likely to play a critical role in shaping the housing market in the coming years. By keeping these trends in mind, stakeholders can work towards creating a housing market that is equitable, accessible, and sustainable for all.
The Latest Housing Market Report for January 2023
The US housing market has been experiencing some interesting trends since January 2023. The National Association of Realtors® has released a report on US Housing Market Trends for January 2023. This report indicates that the market has fallen for the twelfth straight month in January, with mixed month-over-month sales in the four major US regions. The report also provides information on total existing-home sales, housing inventory, median existing-home prices, days on the market, first-time buyers, all-cash sales, distressed sales, and single-family and condo/co-op sales. We will explore these trends in more detail and discuss their implications.
Existing-Home Sales Decline for the Twelfth Straight Month
According to the report, existing-home sales have declined for the twelfth straight month in January. This decline was mixed among the four major US regions, with the South and West registering increases, while the East and Midwest experienced declines. All regions recorded year-over-year declines.
The report indicates that total existing-home sales fell 0.7% from December 2022 to a seasonally adjusted annual rate of 4.00 million in January. Year-over-year, sales retreated 36.9% (down from 6.34 million in January 2022). This decline in sales could indicate that the US housing market is slowing down.
Housing Inventory Increases
The report shows that the total housing inventory registered at the end of January was 980,000 units, up 2.1% from December and 15.3% from one year ago (850,000). This increase in inventory may be good news for buyers who have been struggling to find homes due to low inventory levels. However, the unsold inventory sits at a 2.9-month supply at the current sales pace, unchanged from December but up from 1.6 months in January 2022.
Median Existing-Home Prices Increase
The median existing-home price for all housing types in January was $359,000, an increase of 1.3% from January 2022 ($354,300), as prices climbed in three out of four U.S. regions while falling in the West. This marks 131 consecutive months of year-over-year increases, the longest-running streak on record. This trend in median existing-home prices could indicate that the market is becoming more expensive.
Days on the Market Increase
Properties typically remained on the market for 33 days in January, up from 26 days in December and 19 days in January 2022. Fifty-four percent of homes sold in January were on the market for less than a month. This increase in days on the market could indicate that sellers are having a harder time finding buyers.
First-Time Buyers Account for 31% of Sales
First-time buyers were responsible for 31% of sales in January, identical to December but up from 27% in January 2022. This increase in first-time buyers could indicate that more people are becoming interested in buying homes. All-cash sales accounted for 29% of transactions in January, up from 28% in December and 27% in January 2022. This trend in all-cash sales could indicate that investors or second-home buyers are becoming more interested in buying properties.
Single-Family and Condo/Co-op Sales
Single-family home sales declined to a seasonally adjusted annual rate of 3.59 million in January, down 0.8% from 3.62 million in December and 36.1% from one year ago. The median existing single-family home price was $363,100 in January, up 0.7% from January 2022.
Existing condominium and co-op sales were recorded at a seasonally adjusted annual rate of 410,000 units in January, unchanged from December but down 43.1% from the previous year. The median existing condo price was $320,000 in January, an annual increase of 5.2%.
Distressed sales – foreclosures and short sales – represented 1% of sales in January, identical to last month and one year ago. This trend in distressed sales could indicate that the market is stabilizing.
Regional Breakdown: How Existing-Home Sales Fared Across the US in January
Let's take a closer look at how existing-home sales fared in each region of the country in January.
Northeast:
Existing-home sales in the Northeast retracted 3.8% from December to an annual rate of 500,000 in January, down 35.9% from January 2022. The median price in the Northeast was $383,000, up 0.3% from the previous year. Despite the decline in sales, the median home price in the Northeast remained relatively steady, suggesting that there is still strong demand for homes in the region.
Midwest:
Existing-home sales in the Midwest slid 5.0% from the previous month to an annual rate of 960,000 in January, declining 33.3% from one year ago. The median price in the Midwest was $252,300, up 2.7% from January 2022. The Midwest region has been hit hard by supply chain disruptions and rising material costs, which have caused many homebuilders to delay or cancel new construction projects. As a result, the inventory of homes for sale remains low, which is driving up home prices.
South:
Existing-home sales in the South rose 1.1% in January from December to an annual rate of 1.82 million, a 36.6% decrease from the prior year. The median price in the South was $332,500, an increase of 3.4% from one year ago. The South remains the most active region of the country in terms of existing-home sales, and the modest increase in sales in January suggests that demand for homes remains strong despite the challenges of the pandemic.
West:
Existing-home sales in the West elevated 2.9% in January to an annual rate of 720,000, down 42.4% from the previous year. The median price in the West was $525,200, down 4.6% from January 2022. The West region continues to be the most expensive region of the country in terms of home prices, but the decline in median home prices suggests that the market is becoming more affordable for buyers.
New Home Sales Rise in January from December
The sales of newly constructed homes rose in January from December as mortgage rates eased off their highs of the past year. However, sales of new homes fell 19.4% from a year ago. The median price for a new home also dropped to $427,500 in January, down from $465,600 the previous month, and it was 0.7% lower than the $430,500 median price a year ago. In this blog post, we'll explore the US housing market trends for January 2023 in more detail.
According to a joint report from the US Department of Housing and Urban Development and the US Census Bureau, sales of newly constructed homes were up 7.2% in January from December. This is good news for the housing market, as it suggests that the market may be stabilizing. January's month-over-month gain was the same as an upwardly revised 7.2% jump in December from November.
Sales of new single-family houses were at a seasonally adjusted annual rate of 670,000 last month, up from a revised 625,000 in December. However, sales were down from last year's estimated rate of 831,000. It was the strongest sales pace since March 2022.
Mortgage Rates Eased in January
Mortgage rates eased in January and ended the month nearly a point lower than they were at the beginning of November when they topped 7%. Rates have since pivoted and are trending up again on continuing inflation fears. This is something that potential homebuyers should be aware of when looking to purchase a home.
Home Prices Dropped from December
In a bit of good news for home buyers, prices of new homes dropped from December, and also fell from a year ago for the first time since August 2020. The median price for a new home dropped to $427,500 in January, down from $465,600 the previous month. And it was 0.7% lower than the $430,500 median price a year ago.
Benefits for Potential Homebuyers
The drop in new home sales prices in January is good news for potential homebuyers. This shows another crack in the housing market that should benefit potential homebuyers, especially when mortgage rates drop. The demand to buy is there, particularly when there is flexibility by builders on price. Price adjustments and builder incentives helped to push the sales pace in a positive direction. Motivated buyers are increasingly seeking new homes because there is limited resale inventory available.
New Construction Homes Stepping in to Fill the Gap
A low flow of new listings from existing homes left buyers wanting more inventory to choose from and new construction was able to step in and help fill the gap slightly. Many home builders are offering incentives to buyers, sweetening the deal just enough to bump sales from the month prior. The backlog of new construction homes continues to emerge into the market just in time for the spring shopping season. When those homes hit the market, especially over the next few months, we will see spring home buyers having more options and opportunities to break into homeownership.
In conclusion, the US housing market is showing signs of cooling off as existing-home sales dipped in January across most regions of the country. New home sales rose in January from December, as mortgage rates eased off their highs of the past year. Prices of new homes dropped from December, and also fell from a year ago for the first time since August 2020.
However, the market remains strong, with demand for homes remaining steady and home prices holding up despite the challenges of the pandemic. As we move forward into the new year, it will be interesting to see how the market continues to evolve and how regional differences in supply and demand will impact the overall market.
Even with rising mortgage rates and higher prices, the housing market cannot crash due to low supply and increasing demand as more millennials are projected to buy houses in the years to come. Now millennials make up the largest share of homebuyers in the US, according to a 2020 survey from the NAR. According to a new study by Realtor.com, buying is more cost-efficient than renting in a growing number of the largest cities in the country.
This is encouraging news for the millions of millennials who are approaching the peak homebuying age. Millennials are the largest generation in history, and they are already in their mid-thirties, approaching their prime home-buying years. They were delayed in purchasing a home, but are now back in full force. Thus, we have two, four, or five years of millennial homeownership.
Sources:
- https://www.realtor.com/research/
- https://www.zillow.com/home-values/
- https://www.bankrate.com/mortgages/todays-rates/
- https://www.nar.realtor/research-and-statistics/housing-statistics/
- https://www.nar.realtor/research-and-statistics/housing-statistics/housing-affordability-index
