The savagely unhealthy housing market continues to unfold as we approach Halloween. Sales are still falling, home prices keep rising, and inventory is still negative year over year. The core problem? Too many people chasing too few goods — and days on the market are still under 30 days. On top of all that, mortgage rates are now at 8%. It’s like we invited Freddy Krueger, Jason and Michael Meyers to come for a haunted housing market party.
Let’s review what the existing home sales market has told us in 2023 as mortgage rates have increased.
From NAR: Total existing-home sales – completed transactions that include single-family homes, townhomes, condominiums and co-ops – waned 2.0% from August to a seasonally adjusted annual rate of 3.96 million in September. Year-over-year, sales dropped 15.4% (down from 4.68 million in September 2022).
Here is the breakdown of the key charts on the critical data lines as we go over what NAR has told us.
From NAR: According to the REALTORS® Confidence Index, properties typically remained on the market for 21 days in September, up from 20 days in August and 19 days in September 2022. Sixty-nine percent of homes sold in September were on the market for less than a month.
Days on the market rose year over year from 19 days to 21 days in September. The days on the market metric is very seasonal and we will see the typical seasonal increase now. However, in a regular market this number would be above 30 days. So, while we aren’t at a teenage level anymore, I still prefer the days on the market to be over 30 days.
In addition, cash buyers are up year over year from 22% to 29%. As fewer people finance their homes, the cash buyer percentage grows, especially in a declining sales environment. We can see the other result as first-time homebuyers have moved lower year over year from 29% to 27%.
From NAR: Total housing inventory registered at the end of September was 1.13 million units, up 2.7% from August but down 8.1% from one year ago (1.23 million). Unsold inventory sits at a 3.4-month supply at the current sales pace, up from 3.3 months in August and 3.2 months in September 2022.
So inventory is still down year over year; we saw a slight increase month-to-month on active listings and monthly supply. Monthly supply has the potential to grow more as higher mortgage rates can create more days on the market as homes take longer to sell. This data line can quickly get back to four-months’ supply, which I would look at as a regular marketplace nationally.
From NAR: The median existing-home sales price grew 2.8% from one year ago to $394,300, marking the third consecutive month of year-over-year price increases.
Home prices have been showing positive year-over-year growth and are still trending higher for the year. However, one thing to remember with the pricing data is that the comps are much easier now. We had collapsing home sales last year and month-to-month declines in home prices. So, consider this when we talk about year-over-year data now. The weekly Housing Market Tracker we produce each weekend will give you a more real-time outlook on current pricing in housing today. Always remember median sales price data is seasonal as well.
Today, we see the same trend for existing home sales continue as it has for many months, with sales and inventory both negative year over year. Going out in the future, we are dealing with 8% mortgage rates, which means demand will weaken. With three more reports left for the year, we will see how these higher rates impact housing pricing.