Existing Home Market: March 2023
The number of EXISTING home sales increased as mortgage rates decreased between Dec
Feb. Homes for sale continue to be very low. The home sales spike during COVID and record low mortgage rates brought forward demand. Those buyers have purchased a home and have reduced current period demand.
Existing homes for sale have a seasonal pattern with December being the low for the year.
Homes for sale have been drifting down since 2011 and reached a low as COVID diminished and mortgage rates were at record low levels prior to the Fed increasing interest rates in April 2022 in response to rising inflationary fears. Potential sellers who have low mortgage rates desire to retain these low rates.
Existing Home Months of Inventory remain near record lows.
Pending Home Sales Index has materially decreased over the past 9 months
initially due to a lack of homes for sale AND now rising mortgage rates and home prices but have picked up over the last 2 months.
Prior to COVID, the Days on Market (DOM is the blue line) had been gradually decreasing. After COVID the days on market reached record lows and are now 34 Days as of March 2023.
69% of all properties sell in ONE MONTH (red line).
Mortgage rates are now well above 5.00% (red bars). In late 2022 rates decreased slightly and home sales picked up.
Home prices are the dashed green line and even with mortgage rates rising, home prices rose. This has occurred in the past when rates rose future near-term home buyers rushed into the market to buy before mortgage rates rose further. Now that they are gone, home prices have declined. Higher-end home sales have moderated.
Median home prices for all regions accelerated in early 2022 just as mortgage rates rose, and demand surged. It is noted there was a decline in July and August but an increase in Feb due to the modest mortgage rate decreases in late 2022. Higher-priced homes appear to be more impacted by higher mortgage rates.
The National Association of Realtor’s Pending Sales Index has been declining from their record highs with substantial declines noted in the South and West regions. The declines are a combination of:
Higher mortgage rates (mortgage rates decreased in late 2022 and pending sales increased).
Higher home prices, and
Relatively few homes for sale.
Distress-related home sales remain at record low levels. With recent home price appreciation, distressed homeowners will be able to sell and not sustain equity losses due to foreclosures.
First time home buyers have decreased as mortgage rates and home prices have increased. Record low mortgage rates allowed 5 times income ratios; the ratio now is 3.6 based on 6.62%. That is a ~25% decrease in purchasing power All cash purchases have increased even though investor purchases have been flat.