Written by Breck Hapner
Real estate buyers, sellers, agents, and investors across the U.S. have been engaged in heated discussion over the state of the housing market for many months, with special attention paid to January 2023. Many feared the end of 2022 would bring further woe, but the American economy has continued to rebound.
The recent U.S. fourth quarter Gross Domestic Product (GDP) report showed the economy posted solid growth, increasing at a rate of 2.9 percent after increasing 3.2 percent in the third quarter, far exceeding expectations. Despite the fact that some layoffs are occurring, and the job market seems to be cooling somewhat, the U.S. economy is not shrinking under the weight of high inflation and interest rates.
All evidence is pointing to a U.S. economy that is gaining momentum even as the Federal Reserve keeps raising borrowing costs in an attempt to contain and quell the scourge of inflation. American consumers have shown resilience against higher interest rates and are still buying. As the fourth quarter GDP data suggests, a protracted U.S. recession is probably not going to happen.
In light of the present U.S. economy, potential home buyers and existing homeowners are wondering what to expect from the housing market and whether they should be buying, selling, or remaining in their existing homes.
In this Haven report, we will focus on the latest January 2023 housing trends data culled from Realtor.com, where it is possible to download weekly inventory statistics.”Current Month Data” presents figures for the latest month available, while “Historical Data” contains a monthly series going back in time. National year-over-year data shows changes in asking prices, housing inventory, new listings, days on the market, and reduced-priced listings.
We will take a deep dive into the current U.S. housing market and look at current home prices, housing inventory, and price reductions, all of which will provide some indication of what lies ahead in the U.S. housing market as we approach the spring home buying season.
Based upon an examination of the Realtor.com national weekly spreadsheet, we were able to ascertain that huge changes are occurring in the U.S. housing market, as the number of reduced-priced listings has more than doubled compared to 12 months ago. On top of that, last week’s data shows housing inventory posted the largest increase in over a year.
Asking Prices Drop To Single Digit Increases
On a national level, asking prices saw only single digit increases over the past seven weeks. According to the latest Realtor.com January data, the U.S median asking price only increased 7.3 percent, the smallest increase in at least one year. Previously, every single week had seen double-digit increases in asking prices in the range of 10 to 18 percent.
Housing Inventory Increases
Realtor.com housing inventory data is indicating a bigger inventory on a year-over-year basis. Recent housing supply (active listings for sale in the U.S.) increased 69.4 percent on a year-over-year basis. This is, by far, the biggest increase in the last 12 months. Housing supply gains are significant, indicating a decrease in home buying demand and not an increase of new listings.
This fact is echoed by Nashville real estate agent, owner, and LIZ + CO team lead Liz Zipperer, who points out that an “increase in inventory is welcomed in Nashville! Buyers are still very active in their home searches, so the spring estimates are strong in our market.” “Working to determine seller timelines and buyer wish lists include many variables that are affected directly by the ebb and flow of average days on market, inventory levels, material costs, home prices, and interest rates.”
New Listings Decrease By Single Digits
Zipperer mentions another variable concerning new listings, which have been experiencing single-digit declines during the past three weeks. According to the Realtor.com data, housing supply in the U.S. has been increasing during 17 of the last 19 months since May 2021, despite the fact that we have been seeing fewer new listings for the past 29 weeks in a row.
What does this mean? This data indicates a U.S. housing market shift in which more people are listing their houses for sale, causing housing inventory to increase further. New listings had been declining for the past 29 weeks in a row, but if they start to increase, then housing supply will increase as well, putting more downward pressure on home prices.
Of course, time will tell, especially in the early spring home buying season.
How Fast Or Slow Are Homes Selling?
That being said, how fast or slow are houses selling in the U.S. market? According to Realtor.com data from last week, it took approximately 14 days longer to sell a house compared to a year ago. It is important to remember that days on the market are based on closed home sales, therefore, this is a lagging indication of the U.S. housing market.
“While Nashville approaches a more balanced market, many of the sellers experiencing longer days on market are offering incentives in regard to buyer’s closing cost assistance,” Zipperer said. However, this has a positive effect, in that “clients are experiencing mutually beneficial negotiations where both buyer and seller [have time to] feel satisfaction during the transaction.”
Reduced Priced Listings Increase
One staggering statistic culled from the Realtor.com data shows that the number of reduced-priced listings compared to one year ago has increased 166.4 percent. This is by far the biggest increase on a year-over-year basis in the last 12 months. The spreadsheet statistics show triple-digit increases in the number of reduced-priced listings for ten of the last 12 weeks.
Why are we seeing this increase? One reason was the early proliferation of home sellers listing their houses for far more than they were worth. Based on the current state of the economy and high mortgage rates, these same sellers have been forced by circumstance to reduce their asking prices in order to sell their properties.
“We are certainly noticing the egregiously overpriced homes on the market are eventually reducing their list prices to meet reasonable, fair-market values,” Zipperer said. “That’s a win-win.”
The Future of Housing In 2023
So, based on the facts extrapolated from Realtor.com, we can summarize what we have learned from the January data.
Housing inventory in the U.S. rose by 69 percent last week. This is significant due to the fact that there have been fewer new listings from last year for 29 consecutive weeks, although new listings have declined from double-digits to single-digits. The data also showed a large increase in the number of reduced-priced listings over the past three months, and triple-digit year-over-year gains in 10 of the last 12 weeks.
Buyer confidence is rising because, as CNBC recently reported, 30-year mortgage rates have dropped slightly, from 6.23 percent at the beginning of January to 6.2 percent last week. Due to the declines in home prices and mortgage rates, more buyers will consider purchasing.
According to the Mortgage Bankers Association (MBA), mortgage purchase applications jumped 7 percent in the week ending January 20, 2023, and there has been a slight increase of existing home sales over the past two months.
Lastly, in the good news department, Redfin reported that mid-January pending home sales have started to rise. All these indicators, in addition to the hard data from Realtor.com, suggest that although the state of the U.S. economy is somewhat uncertain, and mortgage rates are still elevated, the housing market is resilient and will continue to recover in the months ahead.
Zipperer agrees, stating that “the increased interest rates allowed my clients time to pivot and refocus their homeownership priorities. While embracing the slower months, both buying and selling clients had the opportunities to be more intentional about what is most important to them in a home, adjust their budget or work to increase savings knowing data shows the rates are cyclical and will eventually rebalance.”
In our February recap, Haven will take a closer look at how the inflation and interest rates are affecting the current U.S. housing market.
