June Market Update

Market Update: Where Buyers and Sellers Stand at the End of May


Where’s the heat in the housing market as we head toward summer? Like the past several quarters, Q2 of 2023 is full of surprises and contradictions. What we know so far just by looking at activity from recent weeks is that the year-over-year mortgage rate is higher, buyers and sellers are still busy looking for opportunities, and some homes are beginning to sit for longer than expected. Let’s dig into the details.


The Market Outlook Heading Into Summer 2023


According to Realtor.com’s weekly housing trends view for the week ending May 13, 2023, the big takeaway is that housing prices are holding steady even though some homes are sitting longer compared to previous quarters. The median listing price has grown 1.1% from this time last year. However, growth of asking price is on the decline.


Homeowners are still reluctant to lower prices because historically high housing costs are causing them to increasingly count on equity from their current homes to be able to fund their next home purchases. This creates something of a stalemate between sellers who have grown accustomed to a seller’s market and buyers who have been reading the tea leaves closely enough to know that demand isn’t what it was just six months ago.


Many buyers are okay with taking a wait-and-see strategy instead of bidding over asking or waiving inspections like they were during the height of the current housing boom because they foresee prices dipping drastically within the next year. However, many buyers in competitive markets are still very much doing “whatever it takes” to get their offers accepted.


New Listings Are Down


According to Realtor.com, new listings for the second week of May were down 25% from a year ago. This is a sign that many homeowners are holding on to their homes. Reasons range from wanting to hold on to their low interest rates to fears of selling “low.” With that said, many insiders anticipate an uptick in listings once summer is in full swing.


Inventory Is Bigger


Active housing inventory is now 23% above what it was this time last year. While the number of homes continues to climb, the increase is actually happening at a slower pace compared to last May. The slower increase is hampering any hopes that buyers had for a sudden dip in home prices caused by a “glut” in the market. The long and short of it is that sellers can continue to count on equity while first-time buyers still struggle with affordability and bountiful competitive offers.


Down Payments Are Down Slightly


The pressure to pony up a big sum to get an offer accepted may be easing now that sellers are growing concerned that the seller’s market of the past three years is waning. In Q1 of 2023, down payments fell for the first time since 2020’s second quarter that basically marked the start of the pandemic-induced “hot market.” However, perspective is needed because down payments in both dollar and percentage terms are still higher compared to before the pandemic. Down payments are up nearly 72% compared to 2020’s first quarter.


Yes, It Feels Like Mixed Signals


If hearing about pricing and inventory being up at the same time that the increase of new homes being introduced to the market is slowing down feels like mixed signals, you’re not alone. Moving into the end of May, this continues to be a very contradictory market. For example, we know that the average home is now spending an extra 15 days on the market compared to May of 2022.


Some perspective can help regarding why that extra time on the market isn’t actually translating to lower costs. As of this spring, homes are still spending 12 days less on the market compared to the years leading up to the pandemic. The data on days spent on the market has also been on a “micro” downward trend since the earlier part of spring. It went from 18 days longer during the week ending April 29 to 16 days longer for the week ending May 6 before dipping even lower to 15 days in the third week of May.


Where Are We With Interest Rates?


Those closely following moves from the Federal Reserve may already know that the Freddie Mac fixed rate for a 30-year mortgage rose slightly in the second week of May to reach 6.39%. While the 0.04 rise in percentage points is unwelcomed by most homebuyers, it still keeps things within the 6% to 7% range that shoppers have been dealing with for close to 10 months. All indicators point to the idea that this rate range is here to stay until the Fed signals a drastic change in policy based on emerging economic data. The writing on the wall is that this won’t be the summer for a return to average rates below 3% from 2020 and 2021.