State of the U.S. Housing Market, November Recap

According to the Realtor.com November 2023 Monthly Housing Market Trends Report, released on November 30th, the number of houses for sale nationwide increased by 0.7 percent this November compared to 12 months ago. Inventory increased 2.4 percent above October levels, marking the first time inventory has increased this late in the fall/winter season since Realtor.com began keeping records in 2016. The Realtor.com report explains that “despite this small monthly and annual increase, active inventory still remained 37.8 percent below typical 2017 to 2019 levels,” pre-COVID levels.

Inventory levels tend to peak in the late summer months, not during the year’s fourth quarter. Referring to the Realtor.com November Active Listing Count graph within the report, the inventory for November 2017, 2018, and 2019 decreased compared to October for all three years. The data additionally reveals that inventory levels for the years 2017, 2018, and 2019 were approximately 1.2 million houses for sale, in contrast to 754,846 for November 2023. So, even though inventory has been steadily increasing throughout the year, homes for sale are still well below pre-pandemic levels. 

Keep in mind that active listings do not need to increase to 1.2 million in order for home prices to decrease. For example, in 2022, inventory levels did not surpass 760,000, which is well below pre-COVID levels, but inventory surged during the spring months, increasing from approximately 350,000 homes for sale in February to 700,000 by July. This surge caused home prices to correct during the last half of 2022. So, a sharp rise in inventory caused home prices to decrease last year.

However, real estate professionals see the situation differently. When asked whether home prices will continue to rise or decline during the next few months, Lahav said “Probably rise as I don’t see inventory catching up to the demand for multiple reasons: less new construction due to high finance costs; high interest rates that pressure prices down and make potential sellers hold from selling. The high interest rates also cause potential sellers to hold since they can’t buy anything else due to high mortgage rates and prices. This will cause low inventory that will cause prices to go up.” And a “strong rental market that results in more homeowners opting to rent out their property then sell it which results in even less inventory.”

The total listing count was down 0.7 percent year-over-year (YOY) in November 2023. Part of the reason active listings are still increasing so late in the season is due to fewer contracts being signed between buyers and sellers, causing houses to take longer to sell and subsequently increasing inventory levels. 

Referring to the Realtor.com November Total Pending Listing Count graph within the report, the number of pending listings declined by 3.6 percent compared to 12 months ago. According to Realtor.com, they serve as “an early indicator of the direction of sales which cooled to a lower annual pace of 3.79 million in October.” This is the lowest level of existing home sales since August 2010, and a 13-year low based on the current sales space for October.

However, the difference in pending listings between this year and last year is narrowing. For example, the disparity in pending listings from January through approximately May in 2023 compared to 2022 was significant. In January 2022, there were approximately 450,000 pending listings compared to only 300,000 this year, reflecting a decrease of 150,000. However, pending listings are now nearly on par with last year’s levels at approximately 355,000. So, while there is a decrease in pending home sales, it is not falling as rapidly as it did compared to last year’s levels.

Referring to the Realtor.com November Newly Listed Homes graph within the report, there are approximately 317,000 newly listed houses for sale, up 7.5 percent YOY in November 2023. Another reason why there are more new listings this year compared to last year is that in 2022, new listings dropped precipitously, causing them to rise in 2023. As you can see in the graph, the new listing gap is closing, getting closer to pre-pandemic numbers from 2017 through 2021. 

But this doesn’t seem to be enough for the number of potential buyers waiting on the sidelines for rates to drop and inflation to cool. The overall low inventory of homes for sale will continue to impact home pricing and competition among buyers which, according to Lahav, “keeps affecting prices as demand is still stable, so prices go up as a result of lack of inventory.”

It will be interesting to see how many newly listed homes are recorded in December 2023 because the number of new listings is roughly on par with pre-COVID levels. Having said that, it would follow the normal trend if new listings declined this month.

“Q4 historically tends to be very sluggish for the real estate market due to the holiday season,” said Lahav. “People also psychologically when close to the end of the year push major decisions like home buying to the following year as part of a new year resolution, so home buying tends to be slower close to the end of the year.”

According to the Realtor.com report, inventory increased in 20 out of the 50 largest U.S. cities compared to one year ago. Metros experiencing the largest increases included Memphis and New Orleans, each with a gain of 25 percent, followed by a nearly 20 percent increase in San Antonio. Despite higher inventory growth compared to 2022, most markets experienced inventory decreases compared to pre-COVID levels, except for a 14.4-percent gain in Austin and a 13.6-percent gain in San Antonio compared to Novembers in 2017 through 2019.

This is one of the reasons why Austin and San Antonio are experiencing home price decreases compared to 12 months ago, whereas areas such as Milwaukee and regions of the Midwest and Northeast are experiencing increases in prices compared to 2022.

Realtor.com also stated that 34 of the 50 biggest U.S. cities saw an increase in new listings in November. New listings increased by nearly 23 percent in Orlando, 0.3 percent in Hartford, Connecticut, and 14 percent in Kansas City. In contrast, the biggest declines were in Richmond, down by 17.2 percent, Las Vegas falling 9.6 percent, and San Francisco dropping 7.5 percent.

Referring to the Realtor.com Days on Market graph within the report, homes are still selling faster compared to 2022 and 2020, but not as fast as they did in 2021.

This November, the typical home spent 52 days on the market, selling three days faster compared to 2022 levels. When comparing the average time on the market during November for 2017, 2018, and 2019, houses are selling 17 days faster in 2023. According to Realtor.com, “Time on market is rising more slowly this year than is typical during the fall season as still-limited supply spurs homebuyers to act quickly.”

This is good news, to a point, but according to Lahav, marketplace education is the most important facet of potentially buying or selling a home. For buyers, Lahav says to “make sure you can really afford the monthly costs of mortgage and other associated fees. Carrying costs are high so be careful and take time to shop around. If you can afford a mortgage and are in good standing, don’t be shy to lowball and negotiate. Bid lenders against each other, use mortgage brokers and not just large banks and compare rates/conditions.” 

Sellers, of course, need to be cognizant of current market conditions. “It’s a good time to list your house due to lack of inventory but you need to be realistic about time on market and pricing,” Lahav said. “With mortgage rates, people can’t overpay so a realistic price will shorten time on the market.”

According to the Realtor.com report, the national median list price decreased from $425,000 to $420,000 in November, remaining relatively stable compared to the same time in 2022, rising by a modest one percent. Listing prices have been kept high due to limited inventory compared to pre-pandemic levels. 

However, the market may take further time to readjust. Lahav states, “This year, in my opinion, will end slow even compared with other years for multiple reasons, mainly high interest rates and low inventory that causes high housing prices.”

Referring to the Realtor.com Price Reduced Share graph within the report, the share of price reductions decreased from 20.2 percent last November, rising to 18 percent in 2023. Realtor.com stated that this November, “the share of price reductions did decline seasonally, however the decline was less prominent than previous years. A greater share of price reductions could be a signal for softness in listing prices.” In other words, if a home is listed at $500,000 with no offers within a month or two, sellers engage in a price reduction to attract a home buyer. Because the increase in price reductions is higher compared to previous years, this could be a sign that some home sellers are overzealous with respect to the current market.

The Realtor.com report also provided data regarding each of the four major U.S. metro regions. The active listing count compared to November 2022 decreased for the Midwest, Northeast, and West. However, the South increased by 3.7 percent. New listings increased on a YOY basis, but all less than five percent. Asking prices increased as well, with the smallest gain in the South at 3.2 percent. 

With new home listings rising, inventory slowly increasing, and median listing prices remaining somewhat stable, home selling sentiment has been improving, although home affordability continues to be an issue. Many experts see the U.S. state of the housing market improving considerably in 2024.

“I’m more optimistic regarding 2024,” Lahav said. “2024 is an election year, so I suspect that with inflation being under control we will hear chatter about lowering interest rates which will cause a spike in interest from buyers. Sellers who held on putting their units on the market will take advantage of the spring market to try and sell their apartments, which will bring more inventory to the market and help ease the supply shortage and help stabilize prices.”