August Market Update

Listing prices are up, sellers are holding on, and some buyers are pulling back! That’s the gist of the monthly housing report for August. Like June and July, August proved to be a very interesting month for home sales that threw its fair share of curveballs. We’re still seeing that “parallel” market trend of increasing home prices in the face of decreasing home sales. Many would-be sellers predictably decided to “stay put” this summer in response to elevated interest rates. Let’s take a closer look at exactly where the market stands as summer 2023 comes to a close.

Fewer Homes Are Being Listed

Let’s start with the biggest piece of news that can be extracted from the August 2023 housing numbers. According to Realtor.com, the number of homes actively for sale decreased by 7.9% compared to August of last year. Additionally, the total number of unsold homes decreased by 9.2% compared to last year. This means that competition continues to be a real thorn in the sides of hopeful buyers.

While many people had predicted a shift to a buyer’s market this summer, a dwindling inventory means that trends tied to bidding wars and unflinching sellers are continuing to drive the closing process. As expected, sellers are continuing to “sit on” their homes instead of upgrading out of concern over high interest rates. Pre-2021 buyers who were locked into rates around 3% simply don’t feel motivated to make the leap to a 7% rate on a new loan just to be able to cash in on their equity.

Interest-rate reluctance probably accounts for a big part of why the number of new listed homes for August stands at 7.5% below last year’s levels. The scramble for homes is fiercest in major cities. Reports show that the number of homes for sale in the nation’s 50 largest metro areas decreased by 13% compared to August of 2022.

While inventory this summer remained historically low, we did see a slight jump of 3.5% between July and August. This is interesting because the typical July-to-August growth rate stays below 1%. Of course, it’s important to keep in mind that all regions in the country are still seeing active inventory down 30% to 60% compared to pre-pandemic levels whenever we’re talking about more inventory hitting the market.

Homes are still being scooped up quickly. Once homes finally made it to the market this summer, they were spending an average of 46 days on the market. While this is still around 13 days shorter compared to pre-2020 averages, homes sat five days longer this August compared to the same time last year.

Trends in August 2023 Home Prices

It shouldn’t be shocking to anyone by now that home prices for August remain “all over the place.” With home prices increasing 0.7% compared to last year, prices technically rose in August. However, this slight increase comes after a two-month streak of annual price declines. It seems clear that prices have been bolstered by an underlying fear of scarcity among buyers. With construction activity continuing to lag in relation to demand, low inventory is expected to remain a driving factor for the foreseeable future.

The big news on price is that there really is no big news. Median listing prices are looking stable in relation to where we’ve seen them for the past 12 months. The real fluctuating factor continues to be the interest rate. The Federal Reserve announced the seventh consecutive increase to the federal funds rate in August. Chair Jerome Powell stated that the Fed would continue to raise rates further as part of an effort to get the inflation level down to the federal goal of 2%.

Interest Rates Continue to Impact the Market

While buyers aren’t getting big surprises with home prices this summer, they are paying much more to finance their homes this August compared to last August. In fact, the average buyer who is financing 80% of their home today is paying 21.7% more compared to the same buyer one year ago. The average mortgage rate for the week starting on Aug. 29 was 7.18%. Will the rates come down in time to shake up the pre-holiday fall market before the notorious December and January slowdowns?

“All Federal Open Market Committee (FOMC) members believe that rates will be stable or higher through 2023 before slowly coming down in 2024–2025 to settle at a comfortable 2.5% for the longer-term,” according to a CNNC report. If true, this could make an August 2024 market look wildly different from the August 2023 market. However, it’s important to remember that many experts predicted that 2023’s rates would ultimately be lower than 2022’s rates. For buyers, betting on a buyer’s market for next summer instead of taking a look at what ends up on the market after the haze from the summer buying frenzy has cleared could be a mistake.