Will Existing Home Sales Climb at all This Year?
A Look at the 2023 Real Estate Market: Supply, Demand, and Price Trends
In the midst of an unprecedented real estate boom, the 2023 housing market has been an intriguing rollercoaster ride for buyers, sellers, and analysts alike. As demand continues to soar, the limited supply of homes has become a major driving force behind the market's resilience. In this blog post, we'll delve into the data provided by Altos Research, which sheds light on key aspects of the housing market, including pending sales, inventory levels, and median home prices.
1. Pending Sales: A Closer Look at the Numbers
NAR (National Association of Realtors) recently reported a decline in existing home sales for June, with an annual rate of 4.2 million. The primary factor contributing to the stability of home prices throughout 2023 has been the high demand that consistently outpaces the limited housing supply. However, the burning question on everyone's mind is whether we have turned the corner on home sales. Will the total sales rate fall below 4 million or climb closer to 5 million?
Altos Research tracks every home for sale in the country on a weekly basis, providing valuable insights into pricing, supply, and demand changes. The data reveals that there are now 378,000 single-family homes in contract, with 68,000 new contracts added this week. Additionally, 15,000 condos and townhomes were also put into contract, contributing to the overall sales rate of 4.2 million homes per year.
2. Inventory: A Critical Factor
In a supply-constrained market, inventory levels play a crucial role in shaping the dynamics of the real estate landscape. The pending sales data provided by Altos Research serves as an early indicator of future sales, as homes typically take 30 to 45 days to close. While demand is limited by affordability, it's the lack of available housing that keeps the sales rate below 5 million. Although the rate of sales isn't accelerating, the comparison with last year's sales, which were heavily impacted by the pandemic, is now getting easier.
3. Median Home Prices: Holding Steady Amidst Rate Fluctuations
The median price of single-family homes that went into contract this week was $380,000, up slightly from last week and 1% higher than the previous year. The data also highlights how home buyers reacted swiftly to last year's significant mortgage rate jumps, causing temporary dips in the market. However, with mortgage rates holding steady between 6% and 7% throughout the year, the expectation is that home prices will end the year slightly higher than in 2022.
4. Price Reductions and Market Balance
The percentage of homes with price reductions increased to 33.7% this week, indicating that sellers are willing to adjust their prices to attract buyers. However, the real estate market remains balanced between buyers and sellers. Price reductions tend to be more prevalent when mortgage rates are near 7% compared to rates closer to 8%. Nonetheless, the overall trend is on the slow side of balance, suggesting that sales prices in the coming months will remain relatively stable.
As we navigate through the second half of 2023, the real estate market continues to demonstrate its resilience, driven by strong demand and a limited supply of homes. While the rate of sales isn't accelerating significantly, the easing comparison with last year's pandemic-affected sales is likely to lead to a modest increase in the total sales rate for 2024. Moreover, the data indicates that home prices are holding steady, with the potential for a slight increase by the year's end.
However, the market remains sensitive to mortgage rate fluctuations, which could impact both sales volume and price reductions. As we approach the peak of housing inventory, staying informed and understanding local market dynamics will be crucial for both buyers and sellers. Altos Research's data provides valuable insights to help navigate this ever-evolving real estate landscape and make well-informed decisions.
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