The real estate 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. The housing market is expected to be a balanced market in 2023, but the answer to the question “Is it a buyers or sellers market?” will vary depending on the location.
US Housing Market Trends in October 2023
Overview of Existing-Home Sales
Existing home sales experienced a notable decline of 4.1% in October, reaching a seasonally adjusted annual rate of 3.79 million. This downturn marked a substantial 14.6% decrease compared to the same period last year. Despite the challenges, Lawrence Yun, Chief Economist of the National Association of REALTORS®, highlighted ongoing multiple offers, particularly in the starter and mid-priced home segments.
Median Existing-Home Sales Price
The median existing-home sales price continued its upward trajectory, witnessing a 3.4% increase from the previous year to reach $391,800. This marked the fourth consecutive month of year-over-year price hikes, showcasing the resilience of the real estate market.
The inventory of unsold existing homes grew by 1.8% in October, totaling 1.15 million units. This equates to a 3.6 months' supply at the current monthly sales pace. Although this represents a slight improvement from the previous month, it reflects a 5.7% decrease from the inventory levels recorded one year ago.
Regional Variances in Existing-Home Sales
Among the four major U.S. regions, existing-home sales experienced declines in the Northeast, South, and West, while remaining unchanged in the Midwest. The pervasive year-over-year sales decline highlights the broader challenges faced by the housing market across the nation.
REALTORS® Confidence Index
The REALTORS® Confidence Index for October revealed that properties spent an average of 23 days on the market, a slight increase from 21 days in both September 2023 and October 2022. Notably, 66% of homes sold in October were on the market for less than a month, emphasizing the brisk pace of transactions.
First-time buyers played a significant role, representing 28% of sales in October, up from 27% in September. This aligns with the findings of NAR's 2023 Profile of Home Buyers and Sellers, indicating a steady annual share of first-time buyers at 32%. Additionally, all-cash sales accounted for 29% of transactions, with individual investors or second-home buyers making up 15% of home purchases in October.
Distressed Sales and Mortgage Rates
Distressed sales, including foreclosures and short sales, remained at 2% of total sales in October. In the realm of mortgage rates, the 30-year fixed-rate mortgage averaged 7.44% as of November 16, reflecting a decrease from the previous week but an increase from one year ago. Lawrence Yun remains optimistic, anticipating improved housing inventory after winter, leading to an uptick in home sales.
Single-family and Condo/Co-op Sales Dynamics
Single-family home sales witnessed a decline in October, reaching a seasonally adjusted annual rate of 3.38 million. This marked a 4.2% decrease from September and a substantial 14.6% drop from the previous year. The median price for existing single-family homes rose to $396,100, reflecting a 3.0% increase compared to October 2022.
Existing condominium and co-op sales also experienced a downturn, recording a seasonally adjusted annual rate of 410,000 units in October. This represented a 2.4% decrease from September and mirrored the 14.6% decline observed year-over-year. Despite the challenges, the median existing condo price reached $356,000, showcasing a notable 7.6% increase from the prior year.
Regional Variations in Existing-Home Sales
Northeast: Existing-home sales in the Northeast declined by 4.0% from September, reaching an annual rate of 480,000 in October. This reflects a significant 15.8% drop from October 2022. The median price in the Northeast surged to $439,200, indicating a robust 7.5% increase from the previous year.
Midwest: In the Midwest, existing-home sales remained unchanged from the prior month, standing at an annual rate of 930,000 in October. However, this figure represented a 13.9% decline from one year ago. The median price in the Midwest reached $285,100, marking a 4.2% increase from October 2022.
South: The South experienced a 7.1% retraction in existing-home sales from September, reaching an annual rate of 1.69 million in October. This downturn reflected a 14.6% decline from the previous year. The median price in the South rose to $357,700, showcasing a 3.5% increase from the previous year.
West: Existing-home sales in the West decreased by 1.4% from the prior month, with an annual rate of 690,000 in October. This marked a 14.8% decrease from one year ago. Despite the challenges, the median price in the West reached $602,200, indicating a 2.3% increase from October 2022.
Market Reflections and Future Outlook
These regional variations underscore the diverse challenges faced by the US housing market in October 2023. While certain regions experienced relative stability, others grappled with notable declines in both sales and median prices. As the market navigates these dynamics, the upcoming months may reveal shifts in buyer sentiment, inventory levels, and overall market resilience.
In summary, the intricate interplay of regional factors contributes to the nuanced narrative of the US housing market in October 2023, reflecting both challenges and opportunities for stakeholders across the nation.
Projected Housing Market Trends in 2023
Buyers may have more leverage in negotiations in 2023, but the market is still competitive in many areas. The housing market has been cooling down in 2023, 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 steadily since the beginning of the year, making it more expensive for buyers to finance a home. 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.
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 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 2023'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 the remainder of 2023 in 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 the latter half of 2023.