August 14, 2023

Sellers stay put despite favorable sales market

According to the most recent consumer sentiment surveys from Fannie Mae, more people consider it a good time to sell.

However, this sentiment is not translating to more listings. Home sellers were less active this July, with 20.8% fewer homes newly listed for sale compared to last year.

Despite the highest mortgage rates in more than a decade, the robust economy continues to support higher demand. U.S. unemployment is low and wages are growing. With prices just short of last year's record summer highs, and home equity booming, most sellers stand to make a decent profit.

There simply aren't enough sellers. Many current homeowners purchased or refinanced their homes between 2012 and 2022, when rates were much lower, and don't feel motivated to sell, and then buy another home at the higher rates. As a result, there are far fewer sellers than would be expected in a market with so many eager buyers. The average time spent in a home reached a record 13 years in 2023.

Even if there were enough homes to buy, many prospective buyers are still priced out of of homeownership by higher mortgage rates and continued higher prices. The monthly cost of homeownership has nearly doubled since the spring of 2022. Affordability is a persistent problem.

The median existing home sales price was $410,200 in June, just 0.9% lower than the all-time high from one year ago of $413,800.

This data provides insight into the trajectory for existing home sales heading into the fall of 2023. The housing market has been characterized by high demand and low supply, driving consumers towards new home builders. Achieving supply-demand equilibrium will take time

Despite limited listings, the number of homes under contract (pending listings) rose 0.3% in June, its first increase in four months. This suggests that the market may be starting to recover.

The National Association of Realtors predicts minimal fluctuations in median home prices for the remainder of the year, with a modest decrease to $384,900. A 2.6% increase is projected for 2024, bringing the median home price to $395,000. Mortgage interest rates are expected to slowly decrease, possibly by a full percentage point, but will remain above the historic lows of 2020 and 2021.

The percentage of homes with price reductions increased has also risen compared to the previous year, suggesting sellers may be setting their initial asking prices closer to buyer expectations.

The market still faces challenges. All regions of the nation saw declines in year-over-year new listings, led by the West at 28.8%%. The Northeast declined the least at 17.7%.