The United States housing market has recently been on fire. It continues to be a topic of great interest for both sellers and buyers as the trends have been constantly changing over the past years.
Let’s explore the key highlights and most recent insights, including the median sales price, median Days on Market, mortgage rates, and number of homes sold that shaped the real estate landscape of the nation during the first quarter of 2023.
Number of Homes Sold
In this year’s Q1, 174,000 homes were sold, and in comparison to the homes sold in Q4 2022, it shows an increase of 32.82%. This increase is seasonal so it isn’t clear evidence of a crazy good market compared to the year-over-year decrease. However, ongoing issues–which we will describe below–contributed to a decline of 16.75% from the same quarter last year.
The ongoing issue of low inventory is one of the major contributors to the decrease in sales. This is a result of several reasons, among them the lack of new construction and the nation’s strong demand for housing.
Another factor is the impact of higher interest rates. Potential sellers, who enjoyed low-interest rates (around 2-3%) in recent years, may be hesitant to list their homes for sale. This reluctance stems from the prospect of purchasing their next home at a significantly higher interest rate of around 6-7%.
As a result, they are more likely to hold onto their current low-rate mortgages and not sell unless necessary. Consequently, the limited supply of homes that enter the market and the high demand result in reduced Days on Market and increased prices.
Median Sales Price
In the U.S., the median price of a home sold in Q1 2023 was $436,800, an increase of 0.85% from the same quarter last year. There’s also a decrease of 8.91% compared to the previous quarter (Q4 2022) which is the highest median sales price in the nation over the last five years. According to ATTOM, the median estimated value over the last month for the states in the U.S. ranged from $101.86 to $493.3/sqft.
The median sales price has increased overall during the past five years. The 2018’s median sales price was $325,275 and the 2022 median sales price was $457,475. This reflects an increase of 40.64%.
Though it’s been steadily increasing, there are very few fluctuations in the quarterly trends. The fluctuations are probably caused by economic conditions, the market’s supply of homes, and other factors that impact the purchasing power and confidence of the buyer.
The rising cost of homes and interest rates also contributes to the cooling of the housing market. It’s still early to say whether it’s in a full-blown slowdown. But, the data suggest that it’s starting to cool down so it will be interesting to see how the housing market evolves in the coming months.
Median Days on Market
In comparison with the first quarter, the median Days on Market for Q1 was 63, reflecting an increase of 10.53% from Q4 2022 and an increase of 40% from the same quarter last year. The median Days on Market of homes sold has been steadily declining over the past 5 years with the lowest being recorded in Q1 and Q2 2021 and 2022.
The low inventory of homes and the rising interest rates are some of the factors that have contributed to this decline. This update is particularly interesting. The median DOM has been increasing since the last three quarters.
This is a sign that the housing market is starting to cool down after a period of rapid growth. Factors include raising interest rates and the increasing inventory of homes for sale. Here are some of our additional insights:
- As there will be no improvement in inventory anytime soon. While we will likely never see the interest rates back in the 3-4%, it has come down slightly in recent months. This trend is unlikely to change anytime soon.
- The increase in median Days on Market is interesting because it suggests that the market is starting to become more balanced.
- This is wonderful news for buyers as it gives them more time to find their ideal home and negotiate a better price.
Mortgage Rates
Mortgage rates have been rising in recent months, and this impacts the nation’s housing market. As of the time of writing, the 30-year fixed mortgage average reached 6.96% and the 15-year fixed mortgage average hit 6.30%. For now, inflation is expected to keep on posing a challenge for housing markets, sellers, and buyers.
Higher mortgage rates can affect the affordability and demand for homes in the U.S. It may also discourage potential buyers from entering the market, leading to a slowdown in demand and which also impacts home prices.
The Federal Reserve raised the Fed Funds rate last May 2023, bringing it to a range between 5% and 5.25%. However, it’s important to note that mortgage rates are influenced by numerous factors such as market forces, economic conditions, and inflations. While the action of the Federal Reserve plays a role in shaping the interest rates, other elements like lender policies and local market conditions also contribute to the fluctuations of the mortgage rate.
Conclusion
As we start a new chapter this 2023, understanding the dynamics of this period is crucial for navigating the market and staying ahead of the curve. The United States housing market is anticipated to be hot in Q2 2023. The competition will be fierce, the demand will grow, and home prices are expected to continue to rise.
Despite that, there’s always a chance that the market will start to cool off in the next quarter although this is less likely to happen if we just based on data over the past five years. Sellers and buyers must stay vigilant, seek guidance from professionals, and closely monitor the trends. As we move forward, let’s remain proactive and optimistic, seizing the opportunities presented by the thriving yet ever-changing housing market.
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