Real Estate Rundown September 2023

Photo by Tom Rumble from Unsplash

Increase to Pending Home Sales 

Pending home sales rose during July 2023 compared to June, marking the highest level since the beginning of the year on a seasonally adjusted basis. Redfin's Chief Economist, Daryl Fairweather, noted that while some potential buyers have been encouraged to enter the market, many remain cautious due to their reduced buying power compared to the previous year. The average 30-year-fixed mortgage rate has risen substantially to 7.23%, contributing to higher monthly mortgage payments. Despite this, the median home sale price saw a 1.7% year-over-year increase to $421,872 in July, indicating a gradual recovery. The ongoing challenge of high home prices is compounded by the scarcity of available properties, resulting in intensified competition among buyers. This seller's market, characterized by low inventory, is causing buyers to be more discerning in their purchasing decisions while also urging sellers to price their homes appropriately to attract the right buyers.

Buyers Are Adjusting to the High Interest Rates

Despite the persistently high mortgage rates, the housing market is showing resilience as home buyers adapt to the elevated rates. Mortgage applications have surged in the latest week, even though rates remained unchanged, reaching a 23-year high. According to MarketWatch, With uncertainty surrounding the U.S. Federal Reserve's impending interest rate hikes, the market composite index, a measure of mortgage application volume, rose by 2.3%. This increase was driven by heightened demand for both home purchases and refinancing. Although the average 30-year mortgage rate stood at a substantial 7.31%, the purchase index saw a 2% rise from the previous week, suggesting that some buyers are accepting the new norm of higher rates with the intention to refinance when rates eventually fall. Despite this positive trend, purchase applications are still down 27% compared to the previous year, while refinancing activity has also increased, reflected in a 2.5% rise in the refinance index. The market's ability to adapt to these challenges demonstrates its ongoing resilience for buyers within the market. 

Strong New Home Sales 

The U.S. Census Bureau reports a notable upswing in the sales of new single-family homes, reaching an annualized rate of 714,000 in July. This marks a 4.4% increase from June and an impressive 31.5% surge compared to July of the previous year. Concurrently, the median sales price for these new houses reached $436,700, indicating a 4.8% uptick from June but an 8.7% decrease from July 2022. The data also highlights an estimated 437,000 new houses available for sale at the end of July, equivalent to a 7.3 months' supply considering the current sales pace. This growth in new home sales reflects their higher availability in contrast to the limited inventory of pre-owned homes. Builders have successfully enticed buyers through reduced prices and incentives, like interest rate buy-downs. According to Zillow Senior Economist Jeff Tucker, builders' adaptability to evolving customer needs, such as offering smaller homes and attractive incentives, has facilitated this growth in the face of increased mortgage rates. The trend is partly attributed to frustrated potential buyers seeking alternatives due to the shortage of existing home listings. As long as elevated mortgage rates deter existing homeowners, the new home construction market is poised for continued success.

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