The current housing market leans towards sellers. With a 3.0 months' supply of unsold inventory, demand exceeds supply, giving sellers an advantageous position. Home prices are on an upward trajectory, witnessing a 5.1% increase from January 2023. The median existing-home price is now at an all-time high of $379,100.
There is no indication of an imminent housing market crash. While sales have moderated compared to previous years, the market remains stable, supported by factors such as lower mortgage rates and increased listings. The current market favors buyers, with increased listings and favorable mortgage rates. However, individual circumstances and long-term goals should guide the decision. Consulting with a real estate professional is advisable.
Analyzing U.S. Housing Market Trends in January 2024
Overview of Existing-Home Sales
Existing-home sales in the United States experienced a notable expansion in January, marking a 3.1% increase to a seasonally adjusted annual rate of 4.00 million. However, this figure reflects a 1.7% decline from the previous year, indicating a nuanced scenario in the real estate landscape.
Median Sales Price
The median price of existing homes showcased a resilient climb of 5.1% from January 2023, reaching $379,100. This marks the seventh consecutive month of year-over-year price gains, underlining the ongoing strength of the housing market.
Inventory Dynamics
The inventory of unsold existing homes increased by 2.0% from the preceding month, reaching 1.01 million at the end of January. This inventory translates to a 3.0 months' supply at the current monthly sales pace, providing valuable insights into the supply-demand dynamics at play.
Regional Variances in Existing-Home Sales
Geographically, the existing-home sales scenario varies across the four major U.S. regions. Sales accelerated in the Midwest, South, and West, while remaining steady in the Northeast. Year-over-year trends reveal an improvement in sales in the West but a decline in the Northeast, Midwest, and South.
Economist's Perspective
National Association of REALTORS® Chief Economist, Lawrence Yun, commented on the findings, noting that while home sales remain lower compared to previous years, January's gain signals a positive shift in supply and demand dynamics. Modestly higher listings and favorable mortgage rates contribute to this optimistic outlook.
Key Statistics and Trends
Total existing-home sales: Completed transactions, encompassing single-family homes, townhomes, condominiums, and co-ops, increased by 3.1% to a seasonally adjusted annual rate of 4.00 million in January. However, on a year-over-year basis, sales slipped by 1.7%.
Housing inventory: The total housing inventory registered at the end of January was 1.01 million units, indicating a 2.0% increase from December and a 3.1% rise from the previous year. Unsold inventory represents a 3.0-month supply at the current sales pace.
Median existing-home price: January witnessed a 5.1% increase in the median existing-home price, reaching $379,100. This surge in prices is evident across all four U.S. regions.
REALTORS® Confidence Index Insights
According to the monthly REALTORS® Confidence Index, properties spent an average of 36 days on the market in January, marking an increase from 29 days in December and 33 days in January 2023.
Buyer Demographics
- First-time buyers: Responsible for 28% of sales in January, down from 29% in December and 31% in January 2023.
- All-cash sales: Accounted for 32% of transactions in January, showing an increase from both December and the previous year.
- Individual investors or second-home buyers: Purchased 17% of homes in January, experiencing a slight uptick from the preceding month and January 2023.
- Distressed sales: Represented 2% of sales in January, indicating stability compared to the previous month and year.
Insights into Single-Family and Condo/Co-op Sales
Single-Family Home Sales
January saw a notable uptick in single-family home sales, reaching a seasonally adjusted annual rate of 3.6 million. This marked a 3.4% increase from December, although a modest 1.4% decline from the prior year was observed. The median existing single-family home price demonstrated resilience, reaching $383,500 – a 5.0% increase from January 2023.
Condominium and Co-op Sales
Existing condominium and co-op sales, at a seasonally adjusted annual rate of 400,000 units in January, remained unchanged from the previous month. However, this figure reflected a 4.8% decrease from one year ago (420,000 units). The median existing condo price stood at $339,400, exhibiting a noteworthy 5.7% increase from January 2023 ($321,100).
Regional Dynamics
Northeast: Existing-home sales in the Northeast remained steady at 480,000 units, showing no change from December but indicating a 5.9% decline from January 2023. The median price in the Northeast rose impressively by 10.1% to $434,300 compared to the prior year.
Midwest: The Midwest witnessed a 2.2% increase in existing-home sales, reaching an annual rate of 950,000 in January. However, this represented a 3.1% decrease from the previous year. The median price in the Midwest surged by 7.6% to $271,700 from January 2023.
South: Existing-home sales in the South experienced a 4.0% rise from December, reaching an annual rate of 1.84 million in January. Despite this increase, a 1.6% decline from the previous year was noted. The median price in the South reached $345,100, showcasing a 4.1% uptick from one year ago.
West: The Western region demonstrated robust performance with a 4.3% increase in existing-home sales from the previous month, reaching an annual rate of 730,000 in January. On a year-over-year basis, sales grew by 2.8%. The median price in the West reached $572,100, exhibiting a 6.3% increase from January 2023.
NAR President's Perspective
NAR President Kevin Sears, broker-partner of Sears Real Estate in Springfield, Massachusetts, emphasized the importance of increased listings for facilitating relocations. He highlighted NAR's advocacy for H.R. 1321 – The More Homes on the Market Act – as a pivotal initiative to lower the tax impact on home sales and inject additional inventory into the market, ultimately benefiting prospective homebuyers.
Projected Future Housing Market Trends
Buyers may have more leverage in negotiations in 2024, but the market is still competitive in many areas. The housing market has been cooling down since last year, but it's still too early to say whether it will be a buyers or sellers market. Some areas are becoming more buyer-friendly and others remain seller-friendly.
Here are some factors that are contributing to this shift in the housing market to become more buyer-friendly:
- Rising interest rates: Mortgage rates have been rising since last year, making it more expensive for buyers to finance a home. If it continues this year, this is expected to slow down demand and give buyers more leverage in negotiations.
- Rising inflation: Inflation is also on the rise, which is making it more expensive for everyone to live, including homeowners. This could lead to some sellers being more willing to sell their homes at a lower price.
- Increasing inventory: The supply of homes for sale is slowly starting to increase, which is also giving buyers more options.
The cooling of the housing market could be terrible news for sellers, 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.
Housing Market 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.
Housing Market 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.
Housing Market 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 toward rising home prices is expected to persist in 2023, particularly in urban areas where the supply is limited.
Housing Market 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. 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.
Benefits for Homebuyers in 2024's Housing Market
There are a few potential benefits for homebuyers in the current real estate housing market:
- More choices: While the supply of homes on the market is still relatively low, it has increased slightly in recent months. This means that potential homebuyers may have more options to choose from when looking for a home. The number of new homes available on the market also increased in February, which means that potential homebuyers have more options to choose from.
- Slower price growth: Although home prices are still rising, the pace of growth has slowed down in some areas. This could make it easier for homebuyers to afford a home in certain markets.
- Easier negotiations: In a slower housing market, sellers may be more willing to negotiate on the price of their home or other terms of the sale. This could give homebuyers more bargaining power and help them get a better deal on a home.
- Lower prices: While the median price of a new home rose slightly from a year ago, the increased inventory could lead to greater competition among sellers, potentially driving down prices.
- Leading indicator: New home sales are considered a leading indicator for the housing market, meaning that an increase in new home sales could signal a positive trend for the housing market overall. This could be good news for potential homebuyers who may be hesitant to enter the market during a downturn.
Looking ahead to 2024, the US housing market, key trends and factors will shape the real estate landscape. These include the influence of interest and mortgage rates on buyer demand, the persistent challenge of limited housing inventory, steady growth in home prices, and concerns over affordability for potential buyers.
Generational shifts and the impact of remote work will also shape housing preferences, while government policies and regional variations will contribute to market dynamics. Overall, staying informed and adaptable will be crucial for navigating the evolving housing landscape in the coming months.
One key factor to watch is the potential impact of policy considerations, such as a temporary reduction in capital gains tax on investment property sales. If implemented, this measure could stimulate the market by increasing housing inventory, sales, and overall economic growth. Policymakers will need to carefully evaluate and balance the potential benefits of such measures against any unintended consequences.
Addressing the challenges of housing inventory and supply levels will be critical moving forward. Collaborative efforts among policymakers, industry professionals, and stakeholders will be necessary to find sustainable solutions. Encouraging an increase in housing inventory will help meet the demand from prospective buyers and potentially stabilize prices.
Localized data and insights will continue to be essential for making informed decisions. Consulting with local associations of REALTORS® and utilizing data from local multiple listing services (MLS) can provide accurate and detailed information specific to particular areas. This will help individuals and businesses navigate market conditions effectively and make strategic choices.
Monitoring forthcoming releases of key indicators, such as the Pending Home Sales Index and Existing-Home Sales data, will offer valuable insights into the evolving trends and dynamics of the real estate market. Staying informed and adaptable to changing conditions will be crucial for making well-informed decisions and seizing opportunities in this dynamic landscape.
While challenges persist, the real estate market also presents opportunities for growth and investment. With careful analysis of market conditions, consideration of policy measures, and collaboration among industry stakeholders, the real estate sector can strive toward a more balanced and sustainable future in 2024.
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