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

Written by Breck Hapner

On May 2nd, for the fourth consecutive month, CoreLogic upwardly revised their 12-month U.S. housing market forecast and real estate predictions. This CoreLogic Home Price Insights report features U.S. housing market analyses through March 2023 and forecasts through March 2024.

The report posted that home prices, based on their Home Price Index (HPI) “increased by 1.6 percent in March 2023 compared to February 2023.”  However, CoreLogic also stated that the growth in home prices over the past year showed the lowest rate of appreciation since the spring of 2012. 

So, CoreLogic is stating that U.S. home prices are creeping upward but not at previously predicted levels. What else of note? Not all markets are experiencing gains. CoreLogic’s May 2nd report showed that home prices are down from one year ago in 10 states compared to March 2022 and also provided the five U.S. markets in which CoreLogic believes will most likely see home prices decline over the next 12 months.

Starting with CoreLogic’s most recent March 2023 data, the report states that “home prices nationwide, including distressed sales, increased year over year by 3.1 percent in March 2023 compared with March 2022.” So, year-over-year, price gains of 3.1 percent. Doesn’t sound bad, right? 

Now, in their most recent forecast for March 2023 through March 2024, CoreLogic predicts that home prices will increase by 4.6 percent YOY. They are also forecasting that home prices will increase by 0.8 percent month-over-month (MOM) from March to April this year.

Interestingly, their forecast of a 0.8 percent gain from March to April is half the current rate, which was a gain of 1.6 percent from February to March of this year. So, in other words, CoreLogic is predicting that home prices increased again between April and May, but at half the rate we saw between March and April. Still, they are calling for home pricing gains, albeit at a much slower pace.

The report also states that “U.S. home price growth fell to 3.1 percent in March, the lowest rate of appreciation since the spring of 2012. While home price growth rose for the 134th consecutive month (on a YOY basis), it declined from one year earlier in 10 states, mostly those in the West, which partially reflects the region’s lack of affordability and continued inventory shortages. Also, continued demand for higher-priced homes is slowing compared with median (average) priced homes, thus pulling appreciation down in that region at a faster pace.”

For example, page 15 of the California Housing Market Update from the California Association of Realtors reflects what CoreLogic is describing. For the month of March 2023 compared to March 2022, home sales for houses that sold for more than $2,000,000 showed the biggest decrease at 47 percent on a YOY basis, and houses that sold in the range from $1,000,000 to $1,900,000 showed a decrease of 39 percent. In contrast, houses that sold this March in the range of $400,000 to $499,000 only decreased 19 percent compared to March 2022. Therefore, in California, we are seeing a decrease of luxury home sales, especially compared to more affordable houses.

This issue is affecting all segments of the market, according to real estate agents Diane Bryant and Margie Wilde of Bryant & Wilde Realty, who specialize in the high-end luxury condo market in Philadelphia.

“There is an overall shortage in housing inventory, more specifically in the suburban housing market priced between $200,000 to $800,000,” Bryant and Wilde said. “In the urban Center City area, there is a shortage of townhouse dwellings. Price points can vary depending on if you are a first or second-time homebuyer. Single family homes and townhouses are quite different in both price point and the demand for sale versus the condo market.”

CoreLogic also noted that “Some potential homebuyers remain hesitant (to buy) due to inflation, slowing job gains and wage growth; a potential recession (in the second half of this year); and interest rates are still elevated above a mortgage rate of 5.5 percent that would likely attract more buyers to the market. As a result of these conditions, CoreLogic projects that U.S. annual home price growth will continue to decline over the spring and early summer before picking back up later in 2023.”

In regard to elevated rates, “The Federal Reserve announced that it’s raising interest rates by 0.25 percentage points, following its May 2nd-3rd meeting, bumping the federal funds rate to a target range of 5.0 to 5.25 percent,” according to a May 3rd Bankrate report. The Fed has also signaled a pause in further raising rates, which may slow the upward pressure on interest rates, at least for the time being. And if inflation continues to subside over the coming months, then that could put further downward pressure on interest rates, meaning that mortgage rates could get cheaper.

Mortgage rates are definitely a concern for all buyers, who inevitably end up influencing the health of the real estate market. 

“With mortgage rates continually increasing, many buyers, especially first-time and move-up buyers, are finding the market unattainable,” Bryant and Wilde said. “The amount of real estate they could have purchased a year ago at 3 percent to 3.5 percent mortgage rates is much different than today’s 6.5 percent to 7 percent mortgage market. Many simply cannot afford to buy or are unwilling to purchase at such a high rate.”

In regard to CoreLogic’s prediction that home prices on a YOY basis are going to continue to decrease in the spring and early summer months, past data aligns with them on this. In 2022, home prices skyrocketed through June, whereas this year, prices are still increasing but not nearly at the same rates exhibited in 2022. This is due to buyers locking in cheaper mortgages before rates increased further. That being said, because home prices are not increasing as fast, the YOY increases predicted through June 2023 will likely get worse than what is projected right now.

In regard to CoreLogic’s predictions that prices will increase later this year, current data suggests this will occur as well, as long as inventory remains at historically low levels. Experts agree that if this scenario prevails, then home prices will not absolutely tank like they did in the second half of 2022.

CoreLogic also discusses how the housing market is sending mixed signals this year, where every region is reporting different numbers. “While housing markets across the country continue to send mixed signals, prices in many large metros appeared to have turned the corner, with the U.S. recording a second month of consecutive monthly gains (gains in prices from February to March 2023). At 1.6 percent, the month-over-month (MOM) increase was twice the average seen between 2015 and 2020. This monthly rebound in home prices underscores the lack of inventory in this housing cycle.” 

In other words, there is a lack of houses for sale, historically speaking. Compared to one year ago, as well as to 2021, there are approximately 50 percent more houses for sale based on data from Altos Research from April 2023. However, compared to pre-COVID levels back in late April 2019, there are approximately 50 percent fewer houses for sale.

CoreLogic also provided the states in which home prices have decreased the most compared to March 2022, as well as the states that posted the biggest gains: “Nationally, home prices increased 3.1 percent YOY in March. Arizona, California, Colorado, Idaho, Montana, Nevada, New York, Oregon, Utah, and Washington saw annual declines in home prices. The states with the highest increases YOY were Vermont (9.9 percent), Indiana (9.2 percent), and Florida (8.9 percent).

It is important to note that in February 2023, two states, Florida and Maine, posted a pricing increase in the range of 10 to 11 percent. Whereas in March 2023, not a single state posted an increase over 10 percent. 

As of this March, the top 10 states reflecting the biggest home price increases are as follows (Click on the map graphic under “HPI National and State Maps – March 2023” to see this list): Vermont led the pack with a gain of 9.9 percent, followed by Indiana, with a gain of 9.2 percent; followed by Florida at 8.9 percent. Maine saw an increase of 8.5 percent; South Carolina, a gain of 7.5 percent; Rhode Island, a gain of 7 percent. Wisconsin had an increase of 6.9 percent; New Jersey and Mississippi each saw a gain of 6.7 percent. Rounding out the list, North Carolina saw a price increase of 6.6 percent.

It is interesting that in CoreLogic’s home price changes for the top 10 states one year ago, from March 2021 to March 2022, every single one of the top 10 states posted an increase of 22 percent or higher, whereas this March, not a single state posted an increase of over 9.9 percent.

CoreLogic also offers an overview of price changes compared to 12 months ago for each of the 10 largest metros in the U.S. (See the “HPI Top 10 Metros Change” graphic to see the market condition indicators for the top 10 metros): 

Miami led the nation again, exhibiting a gain of 14.8 percent with very small increases and decreases everywhere else. Decreases were posted in San Diego, down by 1.7 percent compared to March 2022; Los Angeles with a decrease of 1.7 percent; Las Vegas fell by 3 percent; Phoenix saw a decrease of 2 percent; also, a decrease of 1.9 percent in Denver. Chicago only saw an increase of 3 percent; Washington D.C. saw a gain of 1.2 percent, and Boston saw a very small increase of 0.8 percent. So, half of the ten largest cities have posted price decreases compared to one year ago.

Surprisingly, the West is currently experiencing decreases in prices, but one year ago, large increases occurred compared to the previous year. But not all states have been adversely affected. Miami, Florida is actually holding up fairly well, having seen a gain of 14.8 percent this March compared to March 2022. But last year, Miami saw an increase in gains of 19.8 percent, so not too far off from last year’s gains at 15 percent. But the West looks entirely different one year ago compared to right now. This just goes to show how differently each market is reacting to current economic and financial conditions.

In the final graphic, “Markets to Watch: Top Markets at Risk of Home Price Decline,” CoreLogic forecasts the top five cities at risk for home price decline over the next year. Leading the nation is Provo, Utah with a very high probability that home prices will decrease over the next 12 months; followed by Boise, Idaho with a very high probability as well; then Lakeland-Winter Haven, Florida, followed by Salt Lake City, Utah, then Ogden-Clearfield, Utah. It is interesting to see that three of the markets are located in Utah.

CoreLogic and other industry experts all have varying forecasts and projections regarding how states in the U.S. will further react when markets are buffeted by questions surrounding mortgage rates, home prices, buyer competition, sales activity, and home affordability. 

In other words, current conditions are making homeowners, prospective sellers, and hopeful buyers nervous. Experts tend to view the housing market in transitional terms, meaning lukewarm demand and limited inventory, coupled with high interest rates, are still introducing a high level of uncertainty.

Even though CoreLogic is forecasting home prices will increase, most other professional sources are in agreement that 2023 will be filled with many unknowns that can’t yet be predicted, due to the current state of the economy and financial markets in the U.S. Spring is now in full swing, and the coming new data will tell whether the U.S. housing market begins to rebound or remains in stasis.

In our May recap, Haven will take a further look at the numbers: how the current U.S. housing market is reacting to prevailing economic factors influencing real estate.