Home price growth rose for the 134th consecutive month through March 2023 with a 3.1% year over year increase according to CoreLogic data. Industry expert Barry Habib echoes the price growth trend in home prices with his May 2023 Housing Survey results reporting the “5th straight month of improving activity with 53% of respondents reporting price increases versus only 19% reporting price reductions”. Though a significant calming to the two previous explosive years for real estate, our continued overall positive trend confirms, there is no impending housing crash.
Housing Market Stall
The housing market effectively stalled out with inventory for sale at record lows, mortgage rates climbing 4 percent higher inside of a year and economic uncertainty clouding what the future might hold. The boomerang of market forces halted the accelerated home price growth of 2021 and 2022 at 18.9% and 20.9% YoY, respectively returning our national housing market to an average 3% growth rate. While lagging behind the historical home price growth average of 4.3%, the fear of plummeting home prices is firmly in the rear view mirror.
Affordability Improves
Inflation continues to cool with the May reports reflecting the smallest 12-month increase since April of 2021. Mortgage rates dip mirroring the improvement in Core CPI data, down slightly at 5.5% compared with March at 5.6%.
Good news for affordability as mortgage rates follow inflation and all signs point down. Add a short recession to the mix and suddenly, a mild improvement in affordability is just around the corner.
Looming Recession Further Dampens Supply
In a traditional market, waiting a couple of months for rates to slide down another .50% to 1% and the summer peak months to pass might optimize buying conditions. I caution this approach. The caveat is the ongoing lack of supply that has no path for improvement anytime soon. Year over year permits for new homes are down 35%. While recession breeds lower mortgage rates, it also flags builders to take a pause on generating new inventory. Add to that, an average Spring/Summer demand of 1.2M paired with an available inventory of homes listed for sale of 563,000, and the shortfall in supply makes for bidding wars, continued strong home prices and a challenging market to buy a home.
Be Prepared
If you’re considering a purchase, get prequalified so you’re ready to make a competitive offer that will appear strong in the eyes of the seller. We are already seeing the offers over asking price with closing dates inside of 30 days.
Written for the Landis Group by Sheila Landis
