August 2023 Real Estate Market Update

housing market

August 2023 Real Estate Market Update

Real Estate Market Update: August 2023

 

 

The housing market is rough for both buyers and sellers right now, but this just means you need to be flexible!

Higher home prices and interest rates are pricing some buyers out of the market and making it difficult for sellers considering a move. The good news is that economic growth is still strong and homeowners hold a substantial amount of equity. Experts say the likelihood of a housing market crash is low.

The DC, Maryland, and Northern Virginia housing markets are more balanced than in other parts of the country. Homes are staying on the market longer, but there are still more buyers than homes available. Low inventory has put upward pressure on housing prices on top of higher interest rates, putting homeownership out of reach for some buyers.

The Federal Reserve raised its benchmark rate by 25 basis points in July and has made it clear that they aren’t going to lower rates until we see a 2% inflation rate. As a result, many experts believe mortgage rates will stay above 6% for the remainder of 2023.

Read on to stay up-to-date on the current housing market!

 

August Real Estate Housing Update

 

 

The housing market is still experiencing a seller’s market. Home prices are higher, inventory is low, and mortgage rates are over 7%. It’s been especially difficult for first-time buyers, who are now the oldest since the National Association of Realtors (NAR) first started collecting data on the age of buyers in 1981. The median age of today’s first-time home buyers is now 36, representing just 26% of the market share — another historic low.

The national median existing-home price for all housing types was $406,700 in July, up 1.9% compared to a year ago. Rates and prices have caused housing market activity to decline as the monthly mortgage payment for the typical existing single-family home was $2,246 and $1,948 for a condo at the end of August.

Nationwide, there are 3.3 months of housing inventory, up from 3.1 months in July 2022. This is the time it will take to move the current inventory level at the current sales pace, which is below the desired pace of 6 months. Low inventory levels are the reason why we still see multiple bids pushing up housing prices, but it has softened significantly since the red-hot market we saw during the pandemic.

 

Is it a Good Time to Build a House?

 

 

After seven consecutive months of rises, builder confidence fell in August. The National Association of Home Builders (NAHB) says rising mortgage rates and high construction costs have put a damper on consumer demand.

While housing affordability is still an ongoing challenge, NAHB Chairman Alicia Huey says that “demand for new construction continues to be supported by a lack of resale inventory, as many home owners elect to stay put because they are locked in at a low mortgage rate.”

As buyers struggle to find existing homes for sale, they’ve moved over to the new construction market. Housing starts beat market expectations, according to the Census Bureau. The number of unit starts climbed by 5.9% over the past year. However, Jessica Lautz, deputy chief economist and vice president of research at NAR, says new construction sales prices are about $30,000 more than the typical existing home, which means a monthly mortgage payment of $2,379.

 

Will Interest Rates Drop in 2023?

 

 

Mortgage rates for a 30-year fixed-rate mortgage jumped to 7.23% at the end of August, the highest since June 1, 2001, said Lautz. This is up from 6.81% last month. Applications for home purchase mortgages also fell 5% week-over-week to levels not seen since April 1995.

Rising rates followed the most recent rate hike from the Federal Reserve and the U.S. government credit rating downgrade from AAA to AA+.

The Federal Reserve has raised its benchmark rate 11 times since March 2022 in an effort to cool inflation. The Fed raised interest rates by 25 basis points in July to a target policy rate of 5.25%–5.5% — the highest in 22 years. Federal Reserve Chair Jerome Powell has signaled that rate increases are still on the table to reach its target inflation rate of 2%.

This is bad for the short-term, but Lautz says that if inflation eases and the Fed stop rate increases, then we could see lower mortgage rates in the fall and winter.

 

Housing Market Predictions for 2023

 

 

Fannie Mae economists released a revised forecast, indicating that a stagnation in the housing market could last into 2024. Economists say this will likely happen whether the economy avoids a recession or not, but the odds of a soft landing have increased.

Fannie Mae’s Economic and Strategic Research (ESR) Group forecasts home sales to remain “subdued within a tight range.” If we avoid a recession, the ESR Group expects lower home sale activity due to a lack of existing inventory combined with affordability challenges and homeowners remaining “locked in” to lower mortgage rates.

But if we do enter a recession, improved affordability and inventory could be offset by a weaker labor market, tighter credit standards, and lower consumer confidence, the ESR Group wrote.

 

Will the Real Estate Market Crash in 2023?

 

Most experts agree that we probably aren’t heading toward a housing market crash, and Zillow noted that the market has largely settled. Market crashes typically happen when there’s an economic downturn, rising interest rates, and a drop in demand.

"The housing market is stabilizing after the turbulence of the pandemic, but the effects will be with us for a long time," said Zillow senior economist Jeff Tucker. "Price appreciation is back to normal after a short reset, but that means buyers still face serious cost challenges and competition, especially for the most affordable houses and in less expensive markets."

I was recently featured in an article on Yahoo Finance. Check it out for more information on my thoughts on a possible real estate market crash!

Should I Buy or Sell a House Now or Wait Until 2024?

 

 

Despite the current market conditions, it’s still a good time to buy or sell if you’re flexible.

Buyers: If you can’t find something within your price range, broaden your search and reset your expectations. Interest rates will eventually drop and you will most likely have an opportunity to refinance; however, prices are on the rise. Take advantage of the lulls in the market while you can.

Sellers: Be willing to negotiate and price your home appropriately. Buyers are beginning to pull back, so catching the eyes of serious buyers is a must! Pricing and presentation is of utmost importance so make sure your agent is giving you real-time advice.


But no matter what, buyers and sellers will still benefit from expert real estate leadership. Reach out today and find out how to navigate the current housing market!


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