NATIONAL REAL ESTATE MARKET UPDATE FOR 2023
Jul 26, 2023

There’s an old adage in real estate: location, location, location. But ever since the Federal Reserve began its series of inflation-fighting interest rate hikes last year, a new mantra has emerged: mortgage rates, mortgage rates, mortgage rates.


Higher rates had the immediate impact of dampening homebuyer affordability and demand. But this year, we’re seeing further repercussions. While analysts expected listing inventory to swell as sales declined, instead, homeowners have been pushing off plans to sell because they feel beholden to their existing, lower mortgage rates.


So what impact is this reduced demand and low supply environment having on home values? And what can we expect from the real estate market in the coming months and years? Here are several key indicators that help to paint a picture of the current market and where it’s likely headed.

HOME SALES ARE EXPECTED TO PICK UP BY EARLY NEXT YEAR

The weather isn’t the only thing that heats up in the spring and summer. Nationally, it tends to be the busiest time in real estate. But this year, the peak season got off to a slow start, with sales declines in both March and April.1,2 Existing home sales in April were down 3.4% from the previous month—and 23.2% from a year earlier.2


What’s causing this market slowdown? Industry experts attribute it to several factors, including near-record home prices, high mortgage rates, and low inventory.


According to National Association of Realtors (NAR) Chief Economist Lawrence Yun, “Home sales are trying to recover and are highly sensitive to changes in mortgage rates. Yet, at the same time, multiple offers on starter homes are quite common, implying more supply is needed to fully satisfy demand. It’s a unique housing market.”1


However, some industry experts believe the market is poised for a comeback. Forecasters at the Mortgage Bankers Association (MBA) predict that home sales will continue to fall through Q3 before rising in Q4 and throughout next year.3 Analysts at Fannie Mae expect the recovery to take a bit longer, picking up in early 2024.


Meanwhile, home builder confidence is already up, as purchases of new single-family homes surged in March and April to a 13-month high.5 Builder incentives are helping to boost sales: According to the National Association of Home Builders, in May, 54% reported using them to win over budget-conscious buyers.6


What does it mean for you? A slower pace of sales has given buyers some breathing room. If you hated the frenzy of the pandemic-era real estate market, now might be a better time for you to shop for a home. We can help you evaluate your options and make an informed purchase.


If you plan to sell your home, prepare yourself for less foot traffic and a longer sales timeline than you may have found a year ago. It will also be crucial to enlist the help of a skilled agent who knows how to draw in buyers. Reach out for a copy of our multi-step Property Marketing Plan.

PROPERTY VALUES REMAIN RELATIVELY STABLE

Some good news for buyers: While home builder sales climbed in April, the median new-house price fell to $420,800, an 8.2% decrease from a year ago.5 Meanwhile, the median existing-home price dropped to $388,800, down 1.7% year-over-year. Notably, existing-home prices rose in parts of the country but fell in the South and West.2


“Roughly half of the country is experiencing price gains,” explains Yun. “Multiple-offer situations have returned in the spring buying season following the calmer winter market. Distressed and forced property sales are virtually nonexistent.”2


The average national home price remains about 40% higher than it was in early 2020, according to the S&P CoreLogic Case-Shiller index.7 A tight housing supply has helped to buoy prices amidst a slowdown in sales.


“While it varies from region to region, home prices at the national level may fall 1% or 1.5% by the end of the year, so not much,” Doug Duncan, senior vice president and chief economist at Fannie Mae, told Yahoo Finance in April.8


Record levels of home equity will help to stabilize the sector and prevent a wave of foreclosures, even as prices moderate, according to Mark Zandi, chief economist at Moody’s Analytics.9


“But for those who have owned a home for more than a year or two, their home will remain a rock-solid investment. And once affordability is restored, the next generation of households can become homeowners. Getting there is critical to the financial well-being of those households, their communities, and the broader economy,” writes Zandi in The Washington Post.9


What does it mean for you? Prices have softened in certain market segments—and motivated sellers are out there and willing to make deals. We can help you find your next home and negotiate a great price.


If you’re a homeowner, the surge in home values has slowed, but you’re likely still sitting on a nice pile of equity. Reach out for a free assessment to find out how much your home is currently worth.

LISTING INVENTORY IS LOW, BUT NEW CONSTRUCTION IS ON THE RISE

Unsold existing home inventory rose 7.2% from March to April, according to NAR. At the current level of demand, this equates to 2.9 months of supply, which is still well below the 5 to 6 months of inventory required for a “balanced” market.2


Inventory remains tight despite the market slowdown because many would-be sellers are reluctant to give up their lower mortgage rates. “Affordability is not only an issue for first-time homebuyers, but also for many repeat buyers who still need to take on a mortgage,” explains Danielle Hale, chief economist for Realtor.com.10


In a recent survey by the home listing site, 82% of respondents who are planning to both buy and sell a home said they feel “locked in” by their low rate.11


In some areas, new home construction is helping to fill the supply gap. “Currently, one-third of housing inventory is new construction, compared to historical norms of a little more than 10%,” according to National Association of Home Builders Chief Economist Robert Dietz.12


And more new homes are in the pipeline, after a builder slowdown last year. Single-family housing starts rose 1.6% from March to April (seasonally adjusted) and new construction permits hit a seven-month high.13


What does it mean for you? Inventory remains tight, but less competition means more choice and negotiating power for buyers. If you’ve had trouble finding a home in the past, it may be time to take another look. We can help you explore both new and existing homes in our area.


Sellers are enjoying reduced competition right now, as well. However, the longer you wait to list, the more competition you’re likely to face. And if you feel locked in by your current, lower mortgage rate, consider this: If you roll your equity gains into a down payment on your next home, you could possibly lower your monthly payment. Reach out to discuss your options.

MORTGAGE RATES MAY FINALLY COME DOWN

According to Freddie Mac, the average 30-year fixed-rate mortgage hit a peak of 7.08% in the fourth quarter of 2022, and since then it’s primarily floated between 6 and 7%.14 However, there are signs that rates could trend lower later this year.


“Calmer inflation means lower mortgage rates, eventually,” Yun predicted in a recent statement. “Mortgage rates slipping down to under 6% looks very likely toward the year’s end.”15


Other leading economists agree. In its May forecast, Fannie Mae speculates that 30-year fixed mortgage rates will continue to decline, averaging 6.0% in Q4 2023 and 5.4% by Q4 2024.4 Meanwhile, the MBA predicts rates will fall even faster, averaging 5.6% by Q4 2023 and 4.8% by Q4 2024.3


On May 3, the Federal Reserve raised its benchmark borrowing rate by another quarter point—its 10th consecutive increase since March 2022. However, in its corresponding statement, the Fed omitted language from its previous release about “additional policy firming,” leaving many analysts to speculate that the rate hikes may be over.16


Although mortgage rates aren’t directly tied to the federal funds rate, a decision by the Fed to pause rate increases could have a positive effect. In the meantime, buyers should shop around multiple lenders to find the best rate—and buckle up for what could be an exciting ride.


What does it mean for you? Mortgage rates may finally trend down, which would be great news for buyers. But, a decrease in rates could correspond with an increase in competition and prices. If you start searching now, you’ll be prepared to make an offer when the time is right. We can help you negotiate a great deal and potential seller incentives.


If you’re planning to sell, this is good news for you, too. But, there are several factors to consider when determining the right time to list your home. Reach out for a consultation so we can help you chart the best course.

WE’RE HERE TO GUIDE YOU

While national real estate forecasts can provide a “big picture” outlook, real estate is local. And as local market experts, we can guide you through the ins and outs of our market and the issues most likely to impact sales and drive home values in your particular neighborhood.


If you’re considering buying or selling a home, contact us now to schedule a free consultation. We’ll work with you to develop an action plan to meet your real estate goals.


The above references an opinion and is for informational purposes only. It is not intended to be financial, legal, or tax advice. Consult the appropriate professionals for advice regarding your individual needs.

SOURCES:
  1. National Association of Realtors – https://www.nar.realtor/newsroom/existing-home-sales-slid-2-4-in-march
  2. National Association of Realtors – https://www.nar.realtor/newsroom/existing-home-sales-faded-3-4-in-april
  3. Mortgage Bankers Association – https://www.mba.org/docs/default-source/research-and-forecasts/forecasts/2023/mortgage-finance-forecast-may-2023.pdf?sfvrsn=4bf1d1a7_1
  4. Fannie Mae – https://www.fanniemae.com/media/47006/display
  5. U.S. Census Bureau – https://www.census.gov/construction/nrs/current/index.html
  6. National Association of Home Builders – https://www.nahb.org/news-and-economics/press-releases/2023/05/lack-of-existing-inventory–boosts-builder-confidence-to-key-marker
  7. New York Times – https://www.nytimes.com/2023/04/29/business/spring-housing-market.html?
  8. Yahoo Finance – https://finance.yahoo.com/news/mortgage-rates-increase-after-weeks-of-declines-160015631.html
  9. The Washington Post – https://www.washingtonpost.com/business/2023/04/22/housing-prices-put-some-out-of-the-market/
  10. CNBC – https://www.cnbc.com/2023/04/20/home-sales-fell-in-march-amid-volatility-in-mortgage-rates.html
  11. Realtor.com – https://www.realtor.com/research/2023-q1-sellers-survey-btts/
  12. National Association of Home Builders – https://www.nahb.org/news-and-economics/press-releases/2023/04/lack-of-existing-inventory-continues-to-support-builder-sentiment
  13. United State Census Bureau – https://www.census.gov/construction/nrc/pdf/newresconst.pdf
  14. Freddie Mac – https://www.freddiemac.com/pmms
  15. National Association of Realtors – https://www.nar.realtor/blogs/economists-outlook/instant-reaction-inflation-april-12-2023
  16. CNBC – https://www.cnbc.com/2023/05/03/fed-rate-decision-may-2023-.html

HOW TO BECOME A HOMEOWNER ON A FIRST-TIME BUYER'S BUDGET

03 Aug, 2023
It’s not easy being a first-time homebuyer right now. At the end of last year, housing affordability hit an all-time low.1 Additionally, mortgage rates have risen significantly since 2021, while inventory remains tight for many property categories, but especially for starter homes. Even lower-priced condos are harder to snag these days, as investors and downsizers muscle out first-timers by offering stronger, often cash-heavy bids. In fact, according to the National Association of Realtors, only 26% of last year’s homebuyers were first-timers—the lowest share on record and down from 34% a year prior. This underscores just how steep a hill new buyers are facing.3 As a result, many first-time homebuyers are finding that they need to get creative or risk renting for longer than they planned. If you, too, are struggling to afford homeownership, here are some workarounds to consider as you plot your first home purchase. 1. Try House Hacking “House hacking” is a real estate investment strategy in which participants use their homes to generate income in order to offset their expenditures. For example, renting out a basement apartment or accessory dwelling unit (ADU)—such as a detached garage that’s been outfitted with a bathroom and small kitchen—counts as house hacking. So does splitting housing costs with a roommate or converting a part of your home into an Airbnb. House hacking isn’t new. But, it’s grown in popularity as a new crop of digital platforms has entered the market and made it easier than ever for homeowners to generate income from their property. In some cases, house hacking may make it possible for you to qualify for and afford your first home. A lender, for example, may approve you for a larger mortgage if you purchase a home with immediate income potential, such as a legal duplex or a property with a secondary suite that has a kitchen and full bathroom. In addition, house hacking could help you pay your mortgage once you move in. Here are just a few of the ways you could use your home to earn some extra cash: Offer paid parking in your driveway on a site like Spacer or SpotHero. Rent out your swimming pool for a few hours on Swimply. Make your home available for photoshoots or events on Giggster or Peerspace. Turn your backyard into a pay-by-the-hour dog park on Sniffspot. List your garage space on an app like Neighbor Storage. But before you make plans to house hack, make sure you fully understand an area’s laws and HOA rules. We can help you find a home with income potential in a neighborhood with less restrictive zoning and regulations. 2. Team Up With Friends or Family If you aren’t wild about the idea of welcoming strangers to your home, you may want to consider co-purchasing with a friend or family member instead. This unconventional housing arrangement is also growing more popular as friends and family members cope with higher living costs by pooling resources. According to the National Association of Realtors’ 2022 Profile of Home Buyers and Sellers, the share of first-time homebuyers living with people other than children or a romantic partner is currently at an all-time high. Meanwhile, research from Pew found that multigenerational living has accelerated especially quickly, with a quarter of U.S. adults aged 25 to 34 now living in a multigenerational home. Arrangements can be customized to fit your circumstances. For example, you could purchase a home and then rent a portion of it to a loved one. Or you might consider co-buying a home with friends or family members so that you can step onto the property ladder and start building equity together. Co-ownership could work out especially well for you long-term if it helps you to buy a home that’s bigger, has more investment potential, or is located in a high-demand area and so appreciates at a faster rate. Plus, you’ll get to see your loved ones more often and enjoy the coziness of shared living with people you like having around. On the other hand, sharing a big financial responsibility, like a mortgage, with friends or family could get messy—especially if you don’t create a clear-cut co-ownership agreement beforehand that outlines your mutual expectations. So plan carefully before you proceed. In addition, you may need to rethink the type of home you pursue. For example, a smaller home might be cheaper, but do you really want that much togetherness all the time?  We can help you set priorities and search for a suitable property.

STRESS-FREE HOME CLEANING: 27 PRACTICAL TACTICS FOR BUSY HOUSEHOLDS

03 Aug, 2023
Keeping a clean and orderly home is a challenge for many of us. Between busy work schedules, social obligations, and family commitments, it’s tough to keep up with daily chores—let alone larger seasonal tasks. The effort is worthwhile, however. A sanitary environment can keep you and your family healthier by minimizing your exposure to germs and allergens.1 Plus, researchers have found that organized, uncluttered homes have quantifiable mental health benefits, too, including reduced stress, improved emotional regulation, and increased productivity.2 The reality is, we enjoy our homes more when they are in good order. It’s much easier to relax without piles of unopened mail or a messy kitchen reminding us of work to be done. And don’t we all feel more inclined to entertain family and friends when our homes are well-kept? That’s why we’ve rounded up our favorite tactics—from overall strategies to little tips and tricks—for keeping things tidy without spending all our spare time cleaning. Set a Schedule for Daily and Weekly Cleaning We’ve all been there—you put off vacuuming or mopping your floor for a few days, only to realize that weeks have passed. Creating a cleaning schedule that works for you is the best way to stay on top of things and avoid overwhelm. Here are a few of our favorite strategies: Designate a day of the week for each task—then, add them to your calendar so you can’t forget. Create a shared schedule that assigns specific responsibilities to each member of the household. Post it in a prominent place, like on the refrigerator, or create a shared digital calendar. Carve out 15 minutes a day for cleaning and decluttering. Set a timer on your phone and get as much done as you can before it goes off.  It may take some trial and error to find the tactics that work best for you. The most important thing is to make a habit of cleaning so that clutter and grime don’t have a chance to build. And if you’d like some professional help, reach out for a referral to one of our favorite cleaning services!

RENOVATE OR RELOCATE? 3 QUESTIONS TO HELP YOU DECIDE

03 Aug, 2023
Does your current home no longer serve your needs? If so, you may be torn between relocating to a new home or renovating your existing one. This can be a difficult choice, and there’s a lot to consider—including potential costs, long-term financial implications, and quality of life. A major remodel can be a major commitment. From hiring contractors to selecting materials to managing a budget, it can take a tremendous amount of time and energy—not to mention the ordeal of living through construction or relocating to a temporary residence.  On the other hand, moving is notoriously taxing. In fact, in one survey, 40% of respondents viewed buying a new home as ”the most stressful event in modern life.”1 So which is the better option for you? Let’s take a closer look at some of the factors you should consider before you decide. 1. What Are Your Motivations for Making a Change? It’s possible that some of the limitations of your current home can be addressed with a renovation, but others may require a move. Renovate Certain issues, like dated kitchens and bathrooms, are fairly easy to remedy with a remodel—and the results can be dramatic. In many cases, a relatively minor renovation can significantly increase your enjoyment of your home. Other shortcomings can be more challenging to fix but are worth exploring so that you know your options. For example, if your home feels cramped or it lacks certain rooms, you might be able to make changes like installing an extra bathroom, adding a dedicated office, or finishing an attic or basement. You may even be able to build an accessory dwelling unit or extension to accommodate a multi-generational family. In fact, many Americans have remodeled their homes to meet changing needs since the start of the pandemic. According to the National Association of the Remodeling Industry, 90% of their members reported increased demand for renovations starting in 2020, and 60% reported that the scale of remodeling projects has grown. However, the feasibility and cost of these larger changes will depend on factors ranging from zoning and permitting to your home’s current layout. Speaking with an architect or a contractor can help you make an informed decision. Let us refer you to one of our trusted partners to ensure you receive the best possible service. Relocate Of course, sometimes, even rebuilding your home from the ground up wouldn’t solve the problem. For example, moving may be the only solution if you’ve switched jobs and now face a lengthy commute or if you need to live closer to an aging family member. Conversely, if the shift to remote work has opened up your location options, you may wish to seize the opportunity to relocate to a new locale. A 2022 study found that nearly five million Americans had already moved since the start of the COVID-19 pandemic due to increased flexibility from remote work, and nearly 19 million more were planning to move in the near future for the same reasons.3 Moving may also be the best option, even when you’re happy with your geographic location. A local move may make sense if you’re looking for a larger backyard or significantly more space. Similarly, some frustrations—like living on a busy street or a long way from a grocery store—can’t be addressed with a renovation. We are well-versed in this area and can help you determine whether another neighborhood might suit you and your family better.
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