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

Indianapolis, In | Ryan De Hamer

Written by Breck Hapner

Editor’s note: Welcome to the Haven U.S. State of the Housing Market series. Every month, we will share an update explaining details and projections related to the U.S. real estate sector to keep you informed.

The state of the U.S. housing market is definitely in flux, with higher home prices, mortgage rates, and a lack of inventory synergistically impacting affordability for many buyers.

Over the past 12 weeks, there have been fewer homes for sale compared to the same timeframe last year, which is radically different from the 50 to 60 percent gains from December 2022 through March 2023. Although housing inventory surged in the second half of 2022, the considerable decrease in 2023 inventory is mainly due to new listings falling year-over-year (YOY) for the past 62 consecutive weeks.

Much of the trouble is directly related to current mortgage rates. For example, a Mortgage News Daily report from September 13, 2023, stated that “the 30-year fixed mortgage rate increased to 7.27 percent last week and was 40 basis points higher than where it was in late July.” A Globe NewsWire press release from September 14, 2023, reported findings from the Freddie Mac Primary Mortgage Market Survey (PMMS), which showed that the “30-year fixed-rate mortgage averaged 7.18 percent as of September 14, 2023, up from last week, when it averaged 7.12 percent. A year ago at this time, the 30-year FRM averaged 6.02 percent.”

To further exacerbate these problems, Redfin said that “in August 2023 U.S. home prices were up 3 percent compared to last year, selling for a median price of $420,846.” In a report from September 14, 2023, Redfin said the U.S. median sale price is up by four percent from one year ago, and is only $10K below the record high that was set in June 2022.

A September 11, 2023, WMTV housing report reiterated that one of the main reasons home prices are not falling at the same rate we saw last year is the limited number of houses for sale in the U.S.

What is Happening in the U.S. Housing Market?

According to realtor.com’s Weekly Housing Trends report from September 14th, active inventory has fallen for the last 12 weeks compared to last year, leading to high home prices and competition for listings. Increasing mortgage rates are also discouraging homeowners from putting their properties on the market.

What does the realtor.com data reveal? To access the spreadsheet statistics referenced in this article, head to the realtor.com data library and click on the “View US Data” link.

The September 9th data shows significant changes over the past three weeks. Data for the week ending September 2nd shows the median listing price increased by 0.6 percent compared to the same week one year ago. This marks the second consecutive week in which asking prices increased, which is quite different from the decreases seen in mid-June through mid-July this year.

Atlanta, GA | ibuki Tsubo

Asking Prices are Rising

Asking prices in the U.S. have increased nationwide for the period between September 2nd through September 9th. This rise can be attributed to limited inventory levels of existing houses and the fact that prices were falling at a faster pace last year compared to this year. However, asking prices have been decreasing since June 2023, which is seasonal, as it is normal for asking prices to decline in the second half of every year. The YOY change is up because prices were falling much faster last year.

Will asking prices change due to average 30-year mortgage rates remaining in the range of seven to 7.5 for nearly the last two months? Homeowners are hesitant to give up their historically low mortgage rates for a rate exceeding seven percent, which, for most, is more than double their original rate. Demand is down because of high home prices, and on the supply side, there is a shortage of homeowners listing their houses for sale due to high mortgage rates.

Inventory Levels are Falling

According to the realtor.com data, the number of existing houses for sale compared to one year ago is down by 5.1 percent. This marks the 12th consecutive week of falling inventory levels compared to one year ago. These changes are a stark contrast compared to the beginning of this year when gains of 50 to 70 percent were observed. Inventory skyrocketed last year, but this year, inventory is only up slightly year-to-date (YTD). The supply of houses for sale is not being replenished because there are fewer new listings hitting the market.

One reason there are historically low levels of existing houses can be seen in the realtor.com data. A significant issue is the 7.1 percent decrease in the number of new listings nationwide compared to one year ago. This marks the 62nd consecutive week of YOY decreases dating back to early July 2022.

Over the past month, inventory has only decreased by single digits, compared to inventory falling by double digits for 16 consecutive weeks previously.

Seattle, WA | Robert Ritchie

New Listings Remain Steady

New listings were falling much faster last year due to the sharp rise in mortgage rates in 2022. However, the YOY change in the number of new listings is likely to turn positive, with more new listings compared to last year, primarily because new listings were dropping at a much faster rate last year.

To back that up, according to Redfin’s weekly housing market data, new listings have remained relatively steady, declining since May of this year, although throughout 2022, new listings fell precipitously. The number of new listings for the remainder of 2023 will be limited due to seasonality and high mortgage rates.

Days in the Market are Narrowing

Last week’s realtor.com data shows that the days on the market to sell a house were nearly the same compared to one year ago. Before that, it took longer to sell a home for 58 consecutive weeks. For instance, in the week ending July 8th, 2023, it took 13 days longer to sell a house. This past week, houses are selling in the same timeframe as seen in 2022.

The realtor.com data indicates that the reason the days in the market this year and last year have been narrowing is because the market was slowing down much faster at this time last year compared to this year. Therefore, we could see houses selling faster compared to a year ago very soon.

Boston | todd kent

Price Reductions are Decreasing

According to the realtor.com data, the number of price reductions compared to one year ago shows significant changes. The share of price reductions is roughly in line with the same week of 2018 and 2019, but it’s much higher compared to 2020 and 2021. The year began with triple-digit increases, a gain of over 100 percent in the number of price reductions, with a 20.7 percent decrease last week. This marks the 15th consecutive week of YOY declines. The number of price reductions in negative territory is due to limited inventory levels of existing houses compared to one year ago. Also, price drops were increasing rapidly last year, whereas this year, the share of price drops has remained flat compared to the start of this year.

Is the Housing Market Getting Ready to Evolve?

All these statistics point to the fact that the U.S. housing market has become exceedingly tight and historically unaffordable in the last year. Home sales and inventory remain low, although home prices and mortgage rates remain high. Homeowners looking to sell and buyers hoping to purchase a house are both currently in a state of paralysis, waiting to see how the U.S. real estate market evolves during the month of October, traditionally a good time to find prices and competition lower than their peaks.

That being said, what are some other current challenges facing the U.S housing market?

Los Angeles | Juan Carlos Becerra

U.S. Housing Market Activity Slows

Because of the volatility of mortgage rates, buyers and sellers have been exceedingly cautious and extremely reticent when considering a home sale or purchase. This, of course, has considerably affected real estate market activity.

In a September 13th report, the Mortgage Bankers Association (MBA) presented statistics showing that applications for home loans to buy houses decreased by 27 percent YOY for the week ending September 8th. Not counting the previous week’s diminutive 1 percent increase, the MBA stated, “Mortgage applications decreased for the seventh time in eight weeks, reaching the lowest level since 1996.”

Redfin reported on Sept 15th that pending sales declined by 0.6 percent and by 18.1 percent YOY, with a staggering 60,000 home-purchase agreements canceled in August. In addition, “the total number of homes for sales hit a record low in August, falling 1.1% month over month on a seasonally adjusted basis and 20.8% year over year—the largest annual decline since June 2021.” Also, in an August 30th report, the National Association of Realtors (NAR) reported that pending sales in July fell by 14 percent from July 2022.

Housing Affordability Issues Linger

Due to the Fed’s high interest rates and a severe inventory shortage, housing affordability is a huge hurdle for homebuyers. Compounding these issues, home prices have remained high, decreasing purchasing power.

Sellers and buyers have exited the market, leading to a dip in new listings and pendings compared to the last several years. If homeowners continue to decide that now is not a good time to sell their houses, that will further limit inventory.

In an August 17th article, Markets Insider referenced that Goldman Sachs strategists don’t expect the lack of affordability to change anytime soon, saying “New listings are being added at the lowest pace on record, driving positive net absorption even amid paltry purchase application volume.”

However, NAR Chief Economist Lawrence Yun mentions in a National Association of Realtors article that two principal issues remain: “Rising mortgage rates and limited inventory have temporarily hindered the possibility of buying for many.”

The direction of the U.S. housing market will depend on unemployment, mortgage rates, inventory, and the balance between supply and demand. Experts are still waiting on the sidelines for more data while buyers and sellers have reluctantly acknowledged there is no immediate solution, expecting the real estate market to remain tough over the coming months.

Omaha, Ne | Daniel Halseth

In our September 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.