National Real Estate Market Update for 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.
The National Real Estate Market as a whole appears to be more impacted by the rate change than Seattle Proper. But we have definitely seen a similar shift locally as well.
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
Locally, in King, Snohomish and Pierce Counties, sales continued to increase in both April and May and behaved like a typical spring market. The median number of days before an offer is received is down to less than a week. However, like the national market, sales are down compared to April 2022.
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 national 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 national buyers some breathing room. However, Snohomish, Pierce and King County buyers are not so lucky. With inventory being so low and demand being steady, the market is still competitive. It’s not quite as competitive as last year at this time. I can help you evaluate your options and make an informed purchase.
If you plan to sell your home locally, prepare yourself for slightly less foot traffic and a little 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 my 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
Locally, the median existing-home prices in May dropped 9.8% in King County, 6.3% in Pierce, 6.3% in Snohomish, and 8.8% in Seattle compared to May 2023.
“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
King County median home prices are 42.5% higher, Pierce at 43.4%, Snohomish at 51.5% and the City of Seattle is 28.5% higher than the 3 months pre Covid. 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 scary national news articles can make for motivated sellers.
If you’re a homeowner, the market has softened slightly and prices are not as high as they were last year, but you’re likely still sitting on a nice pile of equity and it is still a “seller’s market”. 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
In King, Pierce and Snohomish counties, we still only have between 0.9 and 1.1 months of inventory, which keeps us very much in a “seller’s” market.
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 a little more choice for buyers. If you’ve had trouble finding a home in the past, it may be time to take another look. I 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
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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 some 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. I 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 I can help you chart the best course.
I’M HERE TO GUIDE YOU
While national real estate forecasts can provide a “big picture” outlook, real estate is local. And as a local market expert, I 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 me now to schedule a free consultation. I’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 -
2. National Association of Realtors -
3. Mortgage Bankers Association -
4. Fannie Mae -
5. U.S. Census Bureau -
6. National Association of Home Builders -
7. New York Times -
8. Yahoo Finance -
9. The Washington Post -
10. CNBC -
11. Realtor.com -
12. National Association of Home Builders -
13. United State Census Bureau -
14. Freddie Mac -
15. National Association of Realtors -
16. CNBC -
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4moDarnell, thanks for sharing!
CEO at Royal Moving and Storage Inc. | Self-motivated and results-oriented person with a strong business and marketing background
8moDarnell, thanks for sharing!