Real Estate Market Update: September 2023

Not very much has changed over the last month. Mortgage rates and home prices are still elevated, making it difficult for buyers to enter the market. However, sellers still have the chance to cash out on valuable home equity.

All major regions in the US recorded year-over-year sales declines as buyers wait for mortgage rates to drop. Experts don’t see housing prices coming down, but if you want to buy now, it’s time to adjust what you’re looking for and shop for the best mortgage rates.

The DC, Maryland, and Northern Virginia housing markets still favor sellers, which means that more people are looking to buy than there are homes available on the market. Data from Zillow and Redfin shows that home prices in the DC area have come down slightly  — as much as 4.2% over the last year — but over one-third of sales are still over list price.

The Federal Reserve paused interest rate hikes this month. Fewer job openings, slower job gains, and easing core consumer price inflation could result in economic damage from rising rates. Economic experts say possible rate cuts need to be considered once inflation is under control.

Check out the latest housing update below!

September Real Estate Housing Update

The housing market remains weak as we continue to experience a seller’s market throughout much of the country. Consumer confidence also dropped to a four-month low in September amid higher home prices and rising fears of a recession.

The median existing-home sales price for all housing types jumped 3.9% from a year ago to $407,100 in August despite lower home sales, according to the National Association of Realtors (NAR). This is also up from the $406,700 national median existing-home price in my last housing market update.

For buyers who purchase the typical single-family home for $413,500 at a rate over 7% for a 30-year fixed-rate mortgage, the monthly mortgage payment would be $2,241. However, the Fed’s pause on interest rate increases could impact mortgage rates.

Total housing inventory at the end of August was 1.1 million units, down 0.9% from July and 14.1% from a year ago. Unsold inventory is currently at a 3.3-month supply, according to NAR, which is up from 3.2 months in August 2022.

Is Now a Good Time to Build a House?

Higher mortgage rates and affordability challenges have weakened new home sales in August, per the latest National Association of Home Builders data. In August, sales of new single-family homes fell 8.7%; however, the pace of new home sales was up 5.8% from a year ago.

Alicia Huey, chairman of the NAHB and custom home builder and developer, says that builders continue to struggle with supply-side concerns and low levels of housing affordability. 

“Higher interest rates price out demand, as seen in August, but also increase the cost of financing for builder and developer loans, adding another hurdle for building,” said Huey.

Builders are also being more cautious about managing their inventory as rates rise, said NAHB Chief Economist Robert Dietz. Currently, 17% of the total new home inventory listed for sale consists of homes that have not yet started construction, up from 10% a year ago.

Housing starts fell 11.3% last month to their lowest level since June 2020, and single-family started dropped 4.3%. However, permits for future new home building increased by 6.9%.

If you’re looking to build, expect to pay more. The median new home sale price in August was $430,300, down 2% compared to a year ago and higher than the median sales price of existing homes.

What Will Mortgage Rates Be in 2024?

Mortgage rates have inched up slightly to around 7.31% for a 30-year fixed toward the end of September. Mortgage rates impact what a buyer can purchase and how much home they can afford.

With the Fed’s rate hike pause, we could see mortgage rates trend downward. In 2024, mortgage interest rates may come down if rate hikes stop and inflation cools, says Jessica Lautz, the NAR’s deputy chief economist and vice president of research.

Keith Gumbinger, vice president at mortgage website HSH.com, told Forbes that what matters is what the Fed intends to do rather than what it does.

“[W]hile not meaningless, another quarter-point hike at this point won’t change the big picture much, as a lot of the ‘damage’ from higher interest rates is either done or is already in process.,” said Gumbinger. 

Rapidly falling rates could cause a surge in demand and push home prices up further. If rate reductions happen gradually, then this could improve buyer opportunities. Gumbinger predicts it could be a while before we see pre-pandemic interest rates.

Housing Market Predictions

Mortgage rates hit their highest levels since 2000, and Shark Tank star Barbara Corcoran doesn’t see them coming down anytime soon. But will rates come down to where people have an incentive to buy? Corcoran says yes.

According to Corcoran, one-third of homes are selling over the asking price, and she believes the housing market is still as strong as ever. When asked whether home prices will become more affordable, Corcoran said prices won’t come down, and buyers need to adjust what they’re looking for.

Lawrence Yun, chief economist at the NAR, told Forbes that he predicts mortgage rates could fall to around 6% by the end of 2023, but nothing is certain as we await possible Fed rate increases.

Will the Housing Market Crash?

Similar to last month, experts still believe that we likely aren’t heading toward a housing market crash, but the housing market is indeed cooling.

Home prices could come down, but housing economists say the decline won’t be as severe as homeowners experienced during the Great Recession. The typical homeowner has strong credit, a lot of home equity, and a mortgage rate below 5% because of strict lending standards. This is nowhere near what we saw during the housing crash during the Great Recession, when foreclosure activity skyrocketed.

Builders are also remaining cautious about the pace of new home construction, contributing to an ongoing shortage of homes for sale. This means buyers have no choice but to bid up prices, and the current supply and demand won’t lead to a price crash.

I was recently featured in a Yahoo Finance article about why we aren't headed toward a market crash. You can read more about it or watch my recent YouTube video where I talk about heading towards a market slowdown!

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

Sellers have the upper hand, but buyers can still take advantage of the housing market by adjusting what they want in a home.

Mortgage applications hit a 27-year low, but real estate broker and investor Ricky Carruth believes this is the lowest it could go before rates go down and push up demand and home prices. If you buy property now, Carruth says you’ll see that appreciation and build equity before buyers flood the market.

And when rates eventually come down, you can always refinance your mortgage. Corcoran says buyers also need to shop for the best mortgage rate. “People don’t know that if you go to your main bank, they will usually give you as a banker at their institution one-quarter percent off,” Corcoran says. “This doesn’t sound like a lot, but at least it helps.”

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