Real Estate Rundown August 2023
August 01, 2023
US Home Prices Experience a 3% Uptick in July
According to national property broker Redfin, the first half of 2023 witnessed a significant annual increase in home prices, with the typical U.S. home sold for roughly $382,000 in the last week of July. This reflects a 2.6% increase from a year earlier, and the most considerable increase since November. Today’s housing market is interesting because prices are increasing despite a lack of demand.
Speculations surround the question of whether home prices will remain financially challenging for potential buyers throughout the remainder of the year. Experts anticipate that home prices will remain relatively stable for the foreseeable future. Greg McBride, chief financial analyst at Bankrate, notes that an easing of inflation pressures and a meaningful reduction in mortgage rates might alleviate some strain for buyers, but overall home affordability is unlikely to see a significant improvement, especially in light of rising interest rates. Nonetheless, there are still plenty of potential buyers waiting to enter the market.
Home Sale Activity and Outlook
According to the National Association of Realtors (NAR), existing U.S. home sales experienced a 23% decline in the first half of 2023. The performance of home sales varied across the four major U.S. regions, with the Northeast seeing gains, the Midwest maintaining stability, and the South and West regions facing decreases in home sales. In June, the total existing home sales, encompassing a range of property sizes, declined by 3.3% from May, resulting in a seasonally adjusted annual rate of 4.16 million. This reflects an 18.9% year-over-year drop from June 2022 figures.
Lawrence Young, Chief NAR Economist observes that despite typical life-changing circumstances, fewer Americans chose to move during this period. However, experts predict that pent-up demand is likely to manifest in the near future, particularly if mortgage rates and housing inventory become more favorable. Given the limited availability of homes for sale, the market has the potential to readily absorb a doubling of inventory.
NAR’s Latest Market Forecast
NAR’s latest forecast projects a 12.9% decrease in existing home sales for 2023 compared to 2022, followed by a 15.5% increase in 2024. Additionally, newly constructed homes are expected to draw more buyers into the market, with a projected rise of 12.3% in 2023 and a further 13.9% increase in 2024. By expanding the supply of homes, the goal is to improve access to homeownership, subsequently stimulating relocation activity for more Americans.
Dodging a Housing Recession
Recent announcements by The Federal Reserve reveal that they are no longer forecasting a broad economic recession for 2023. This development offers hope for the housing market, as it implies a higher likelihood of job retention and increased consumer spending, including significant purchases like houses.
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