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 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 toward 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. 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 Update for April 2023
Key Highlights from Recent Data:
- Median prices have experienced a decline of 1.7% compared to the previous year, with the current median price at $388,000, down from $395,500.
- The average days on the market have reduced to 22, indicating a faster pace of home sales compared to the previous figure of 29 days.
- First-time buyers have slightly increased their presence in the market, accounting for 29% of all home sales, up from 28%.
- All-cash buyers have also seen a marginal increase, comprising 28% of the market compared to the previous figure of 27%.
- Investor share remains steady at 17%, suggesting that investors are maintaining their position despite the slump in overall sales.
- Existing-Home Sales Dropped by 3.4% in April.
April saw a decline in existing-home sales across the United States, with all major regions experiencing both month-over-month and year-over-year decreases. Factors such as job gains, limited inventory, and fluctuating mortgage rates have contributed to the fluctuating housing demand. While the housing market remains above recent cyclical lows, the market's ups and downs reflect the dynamic environment in which it operates.
Inventory levels showed a slight increase, providing some relief, but overall supply remains limited. Price trends varied across regions, with some experiencing gains while others saw declines. The market activity showed signs of resilience, with properties spending fewer days on the market compared to the previous month.
First-time buyers' share of sales increased slightly, although it remained low compared to previous years. Cash sales and distressed sales remained stable, and the overall market showed signs of stability despite the decline in sales. The regional breakdown highlighted variations in market performance across different parts of the country.
Home Sales Decline Amid Market Factors
In April, existing-home sales experienced a decline, marking a decrease in both month-over-month and year-over-year sales across all major regions in the United States. The National Association of REALTORS® reported that total existing-home sales, which include single-family homes, townhomes, condominiums, and co-ops, slid 3.4% from March to a seasonally adjusted annual rate of 4.28 million in April.
Year-over-year, sales slumped by 23.2%. Despite the decline, the housing market continues to be influenced by factors such as job gains, limited inventory, and fluctuating mortgage rates, creating a push-pull effect on housing demand.
The combination of job gains, limited inventory, and fluctuating mortgage rates have contributed to the volatility in existing-home sales. While the housing market is experiencing ups and downs, it remains above recent cyclical lows. NAR Chief Economist Lawrence Yun acknowledges the dynamic environment and its impact on housing demand.
Inventory Levels and Supply
Total housing inventory at the end of April showed a slight increase of 7.2% from March and 1.0% from the previous year, reaching 1.04 million units. Unsold inventory represents a 2.9-month supply at the current sales pace, which is higher compared to March's 2.6 months and April 2022's 2.2 months. The rise in inventory levels provides some relief, but supply remains limited overall.
Home Price Trends and Regional Variations
In April, the median existing-home price for all housing types was $388,800, indicating a decline of 1.7% from the previous year. While prices rose in the Northeast and Midwest regions, they retreated in the South and West. Approximately half of the country is experiencing price gains, with multiple-offer situations returning in the spring buying season, particularly in the more expensive West region. Distressed and forced property sales have become virtually nonexistent.
Market Activity and First-Time Buyers
Properties spent an average of 22 days on the market in April, down from 29 days in March but higher than the 17 days in April 2022. Notably, 73% of homes sold within a month of listing. First-time buyers accounted for 29% of sales in April, showing a slight increase from both March 2023 and April 2022. However, NAR's 2022 Profile of Home Buyers and Sellers revealed that the annual share of first-time buyers was 26%, the lowest recorded since NAR began tracking the data.
Cash Sales and Distressed Sales
All-cash sales represented 28% of transactions in April, a slight increase from both March and the previous year. These cash transactions often involve individual investors or second-home buyers, who purchased 17% of homes in April, remaining consistent with the previous month and year. Distressed sales, including foreclosures and short sales, accounted for only 1% of sales in April, showing no change compared to the previous month and year.
Single-Family vs. Condo/Co-op Sales
In April, single-family home sales declined to a seasonally adjusted annual rate of 3.85 million, down 3.5% from March and 22.4% from the previous year. The median existing single-family home price in April was $393,300, indicating a 2.1% decrease from April 2022. Existing condominium and co-op sales recorded a rate of 430,000 units, reflecting a decline of 2.3% from March and 29.5% from the previous year.
Regional Breakdown
Existing-home sales in different regions of the country also experienced declines in April. Here's a breakdown of the regional sales figures:
- Northeast: Existing-home sales in the Northeast region decreased by 1.9% from March to an annual rate of 510,000 in April, down 23.9% from April 2022. The median price in the Northeast was $422,700, representing a 2.8% increase compared to the previous year.
- Midwest: Existing-home sales in the Midwest declined by 1.9% from the previous month to an annual rate of 1.02 million in April, marking a 21.5% drop from the previous year. The median price in the Midwest was $287,300, indicating a 1.8% increase from April 2022.
- South: The South region experienced a 3.4% decrease in existing-home sales from March to an annual rate of 1.98 million in April, representing a 20.2% decline from the previous year. The median price in the South was $357,900, showing a slight decrease of 0.6% compared to April 2022.
- West: Existing-home sales in the West region slipped by 6.1% from the previous month to an annual rate of 770,000 in April, down 31.3% from the previous year. The median price in the West was $578,200, indicating an 8.0% decrease from April 2022.
New Home Sales Rise for the Fourth Month in a Row
The housing market in the United States has been experiencing positive trends as new home sales continue to rise for the fourth consecutive month. With mortgage rates easing and a shortage of existing homes for sale, buyers are turning to new construction as an attractive alternative.
The latest joint report from the US Department of Housing and Urban Development and the US Census Bureau reveals the recent surge in new home sales, along with other noteworthy developments in the housing market. This article explores why tech hubs are seeing home prices cool faster than other areas and analyze the key factors contributing to the overall stability of the housing market.
New Home Sales Show Encouraging Growth:
In March, sales of newly constructed homes increased by 9.6% compared to the previous month. This upward trajectory in sales suggests a potential stabilization of the housing market. The seasonally adjusted annual rate of new single-family houses sold reached 683,000, surpassing the revised figure of 623,000 in February. Although sales were down by 3.4% from the previous year, the consecutive monthly growth indicates a positive shift in buyer behavior and confidence.
Factors Driving New Home Sales:
Several factors have contributed to the rise in new home sales. One significant factor is the easing of mortgage rates. In February, rates experienced a surge, reaching as high as 6.73%. However, as uncertainty spread through the financial industry due to mid-March bank failures, rates fell throughout the rest of the month. This decline in mortgage rates led to an increase in mortgage applications, enabling more buyers to enter the market and invest in new homes.
Tech Hubs and Cooling Home Prices:
One interesting trend observed in the housing market is the cooling of home prices in tech hubs compared to other areas. While prices of new homes rose from February to March overall, tech hub regions experienced a faster cooling effect. This phenomenon can be attributed to buyers adjusting to elevated mortgage rate levels and the subsequent downward adjustment of home prices in those areas. Buyers who were initially hesitant due to high mortgage rates are now taking advantage of the price adjustments, leading to increased demand for new homes.
Inventory and Affordability:
Despite the rise in new home sales, inventory levels saw a slight decrease in March. The seasonally adjusted estimate of new houses for sale dropped to 432,000, down from 436,000 in February. This reduction indicates a supply of 7.6 months at the current sales pace, compared to 8.2 months in the previous month. While the decrease in inventory may present challenges for buyers, it also highlights the demand for new homes in the market.
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.
In conclusion, the housing market in 2023 is predicted to slow down further, with rising mortgage rates, increasing demand for affordable housing, a shift towards suburban and rural areas, rising home prices, and stricter mortgage standards. Despite economic uncertainty, technological advancements such as virtual home tours and digital transactions are expected to streamline the home buying and selling process.
In April, existing-home sales experienced a decline across the United States, affecting all major regions and resulting in both month-over-month and year-over-year decreases. This can be attributed to factors such as limited inventory, fluctuating mortgage rates, and varying job gains. While the market remains above recent lows, its volatility reflects the dynamic environment in which it operates.
Inventory levels showed a slight increase, providing some relief, but overall supply remains limited. Price trends varied across regions, with some areas seeing gains while others experienced declines. Despite the decline in sales, the market showed signs of stability, with properties spending less time on the market compared to the previous month.
The share of first-time buyers increased slightly, although it remained low compared to previous years. Cash sales and distressed sales remained stable, indicating overall market stability. It is important to note that market performance varied across different regions, emphasizing the need for localized analysis and understanding of unique market factors.
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. 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. However, as the housing market continues to evolve, staying informed and adaptable is crucial for buyers, sellers, and industry professionals alike.
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
