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.
Current 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.
US Housing Market Trends in August 2023
The real estate market in August witnessed a 0.7% decline in existing home sales, portraying a seasonally adjusted annual rate of 4.04 million. This analysis delves into the critical aspects of this decrease and its implications for the real estate landscape.
Here are the key highlights from the August report by the National Association of Realtors® (NAR):
- Sales Downturn: Existing-home sales experienced a 0.7% decline in August, resulting in a seasonally adjusted annual rate of 4.04 million. Additionally, sales showed a significant year-over-year drop of 15.3% compared to August 2022.
- Median Price Increase: The median sales price for existing-homes rose by 3.9% from the previous year, reaching $407,100. This marks the third consecutive month where the median sales price has surpassed the $400,000 threshold.
- Inventory Status: The inventory of unsold existing homes witnessed a 0.9% decrease from the previous month, resulting in 1.1 million units available at the end of August. This corresponds to a 3.3 months' supply at the current monthly sales pace.
Regional disparities were evident in August's existing-home sales:
- Midwest: Sales improved by 1.0% compared to the previous month but decreased by 16.4% from the prior year.
- Northeast: Sales remained unchanged from July but witnessed a substantial year-over-year decline of 22.6%.
- South: Sales decreased by 1.1% from July, resulting in a 12.4% drop from one year ago.
- West: Existing-home sales in the West slumped by 2.6% from the previous month and declined by 15.7% from the prior year.
Market Insights and Analysis
NAR Chief Economist Lawrence Yun remarked on the stability of home sales over the past few months, highlighting the role of mortgage rate fluctuations and job gains in influencing short and long-term market trends. Despite the sales downturn, home prices continued to rise, underscoring the urgent need to augment housing supply to moderate these price gains.
Market Participants and Trends
Insights into market participants and trends for August:
- First-Time Buyers: First-time buyers constituted 29% of the sales in August, marking a slight decrease from July. This percentage remained identical to the figures from August 2022.
- All-Cash Sales: All-cash transactions accounted for 27% of the total transactions in August, indicating a rise from both July and August 2022.
- Distressed Sales: Distressed sales, including foreclosures and short sales, remained consistent at 1% of total sales in August, unchanged from the previous month and the previous year.
Mortgage Rate Trends
As of September 14, Freddie Mac reported a 30-year fixed-rate mortgage averaging 7.18%, showcasing a notable increase from the prior week and a substantial rise from one year ago.
The real estate market in August continued to grapple with a sales downturn, highlighting the need for strategic interventions to bolster market activity. Efforts to stabilize mortgage rates and stimulate job growth can potentially provide the necessary impetus for a more robust market performance in the coming months.
More on Regional Housing Market Trends
The existing-home sales data for August provides a comprehensive view of the real estate market across different regions in the United States. Here's a breakdown of the housing market performance in the four major regions:
In August, existing-home sales in the Northeast were reported at an annual rate of 480,000, remaining unchanged from July but displaying a significant decline of 22.6% compared to August 2022. Despite this decline in sales, the median home price in the Northeast increased by 5.8% from one year ago, reaching $465,700.
Contrary to the trend in the Northeast, the Midwest witnessed a 1.0% increase in existing-home sales from the previous month, resulting in an annual rate of 970,000 in August. However, when compared to the previous year, there was a notable decline of 16.4% in sales. Despite this, the median home price in the Midwest showed resilience, experiencing a 6.8% increase from August 2022, reaching $305,300.
Existing-home sales in the South saw a slight decline of 1.1% from July, resulting in an annual rate of 1.84 million in August. This represents a 12.4% decrease in sales from one year ago. In contrast to the sales decline, the median home price in the South increased by 3.2% compared to August 2022, reaching $366,100.
The Western region experienced a 2.6% decline in existing-home sales from the previous month, reporting an annual rate of 750,000 in August. When compared to the prior year, there was a significant decline of 15.7% in sales. Despite this sales downturn, the median home price in the West exhibited a modest increase of 1.0% from August 2022, reaching $609,300.
These regional variations in both sales and median home prices shed light on the diverse dynamics of the housing market in different parts of the country. Understanding these trends is crucial for both homebuyers and sellers to make informed decisions in their respective real estate transactions.
New Home Sales Trends: A Comprehensive Analysis
According to a joint report from the US Department of Housing and Urban Development and the Census Bureau, in July, new home sales surged, surpassing expectations and achieving a 17-month high. This rise is attributed to buyers turning towards new construction due to the severely limited supply of existing homes. Sales of newly constructed homes increased by 4.4% in July, reaching a seasonally adjusted annual rate of 714,000, up from a revised rate of 684,000 in June. Compared to the previous year, sales saw an impressive increase of 31.5%.
Market Dynamics and Affordability Concerns
While the new construction market benefits from the scarcity of inventory, concerns about affordability persist. Homeowners with existing mortgage rates of 3% or 4% are hesitant to sell and purchase a new home at significantly higher rates. Mortgage rates recently exceeded 7% and are not anticipated to decrease in the near future.
Regional Variations and Market Fluctuations
New home sales in July exhibited regional disparities, reflecting local price and inventory fluctuations. Sales in the Midwest surged by an impressive 47.4% from the previous month, while the West experienced a notable increase of 21.5% from June. In contrast, sales in the Northeast declined by 2.9% from the previous month and dropped by 6.3% in the South.
The pricing dynamics in the new home market are notable. While prices of existing home sales are on the rise, with the price for a single-family home at $412,300 in July (up 1.6% from a year ago according to the National Association of Realtors), the median price of new homes sold in July witnessed a decrease of 8.6%, reaching $436,700 from $478,200 a year ago.
Inventory and Supply
Inventory and supply are critical aspects influencing the new home market. At the end of July, there were 437,000 new homes available for sale, equivalent to about 7.3 months of supply at the current sales rate, according to the Census Bureau report. Although this is less than half of the available inventory of existing homes in July (about 1.1 million), new home inventory has been gradually increasing in recent months. However, it still remains 4.8% below last year's level.
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.