Real Estate Rundown | April 2023
April 01, 2023
Photo By Enrique Hoyos Via Pexels
Impact of Winter Weather on Spring Real Estate: Will Bad Winter Weather Bring Spring Leads?
The 2022/2023 Winter season has brought extreme winter weather across the country. While some average temperatures have increased, so has the severity of winter weather. We’ve seen record-breaking snowfall and below-average temperatures in many regions nationwide. In February 2023, 479,000 square miles of the western United States were covered by snow, which is the 5th largest coverage recorded. This weather has exacerbated the seasonality of the real estate market. However, some experts are predicting that due to this tough Winter, the Spring will bring more listings than usual.
The current market depression has not only been due to the weather. While mortgage rates have slightly lowered in the last couple of months, they are still over 2% higher than they were this time last year. Experts expect this spring to be somewhat dependent on the fluctuations of the current mortgage rates. If the rates increase closer to 7%, some home hunters will be more likely to wait for more favorable rates, but a drop could lead to a stronger market. Regardless of mortgage rate trends, listings consistently increase in the warmer months, especially in northern parts of the United States where the market is understandably tougher due to the harsh Winter conditions. Given the current trend of lower rates and soon-to-be warmer temperatures, the real estate market could see a sizable increase in listings as we enter the Spring months.
Home Prices are Falling, Leading Home Sales to Pick Up
Home prices are falling for the first time in over a decade. The National Association of Realtors (NAR) noted that the median existing home sold for $363,000, down 2% from February 2022. This is the first time home prices have fallen nationally from the year prior since 2012. Experts forecast further declines in home prices in 2023 and 2024.
One reason for this trend is that housing affordability is at the lowest level in a decade. According to Atlanta Fed’s Housing Affordability Monitor, which compares home prices and other housing-related costs with household incomes, housing affordability is worse today than it was during the 2008 financial crisis. The typical U.S. homebuyer would have to spend about 43% of their income to afford a median-priced home. Low housing affordability has reduced the number of buyers and demand for housing, causing home prices to drop.
This trend varies depending on where you are in the country. It is important to keep an eye on local markets, as areas formerly known as hot markets are now cooling rapidly. For example, the median existing home prices in the Northeast and Western regions fell 4.5% and 5.6% respectively from the year prior, while those in the Midwest and southern regions gained 5% and 2.7% respectively.
While existing home prices have decreased, home sales have ticked up. The seasonally adjusted annual rate of existing home sales gained 14.5% to 4.58 million in February which is the greatest month-over-month increase since June 2020. This increase represents a recovery from January’s rate of four million, which was the lowest reading since October 2010. Lower mortgage rates are also responsible for this gain in home sales, according to Lawrence Yun, chief economist at the National Association of Realtors. He notes that consumers are taking advantage of the lower mortgage rate of 6.3% compared to the 7% we witnessed towards the end of last year.
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