MarketNsight announces its latest real estate market update, showcasing the industry’s most recent trends and data. The real estate market has seen a significant improvement since November 2022. The Federal Reserve’s decision to slow down the pace of interest rate hikes to 0.25% has played a crucial role in motivating buyers and calming anxiety across the industry. Additionally, the release of fourth-quarter builders’ earnings, which were better than expected, has led to a surge in home builder stock prices.
Further, the latest jobs report revealed an outstanding increase of 517,000 jobs added in January, contributing to the positive news.
This MarketNsight update, covering the first two weeks of February 2023, shows that the overall pending sales trends since November 2022 are still positive despite mortgage rates creeping up to 6.12 in the first week of February and 6.32 in the second week. Pending sales are still up 29 percentage points from the bottom over 2021/2022 and 24% compared to 2019.
Pending sales in the second week of February 2023 were down 16% year to year. Compared to 2019, pending sales were down 9%.
Supply and Demand
Total home inventory is now at its lowest level in seven months, and the months of supply dropped to 1.7 from the 1.8 observed by MarketNsight at the end of January 2023.
“We predicted this months ago as the market slowly returns to more normal seasonal dynamics,” MarketNsight Chief Analyst John Hunt said.
The total annual housing deficit increased to 63,000 from 62,000. This is due to the drop in supply relative to the demand, which has remained fairly consistent.
“Our prediction? We will see demand rise moderately into the spring selling season, and months of supply will not go above three in the third and fourth quarter of 2023,” said Hunt.
What About Price?
The first two weeks of February started where January left off, and prices are down 1% versus a complete February 2022.
“As we have been saying for months, the predicted collapse in home prices has not materialized, and we do not foresee that happening with inventory still at historic lows,” states Hunt. “The average price for the first two weeks of February 2023 is still 17% higher than January 2021, 39% higher than January 2020, and 47% higher than January 2019.”
New Home Market Share and Seasonality
New home market share currently has a more significant piece of the pie. This is another sign that the market is returning to normal seasonality.
“In normal markets, existing home sellers typically take their homes off the market during the fourth and first quarters as they do not want prospective buyers touring their personal homes during the holidays,” said Hunt.
Builders do not take their homes off the market during the holidays—that would be crazy. December is usually the second-highest month for closings all year. So, the new home market share rises in the fourth and first quarters because there is very little high-quality resale to compete with during those months.
Where Will Mortgage Rates Go from Here?
The home building industry is inextricably tied to the direction of mortgage rates. “No one can know for sure what the rest of 2023 will bring, but I agree with Nadia Evangelou, senior economist at the NAR, who said that mortgage rates will stabilize below the 6% threshold this year,” said Hunt.
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MarketNsight currently serves 35+ cities in seven states – Alabama, Florida, Georgia, Louisiana, North Carolina, South Carolina, Tennessee, Texas and Virginia. Look for the addition of more cities soon!
To schedule a demonstration of the MarketNsight Feasibility Matrix® or Mortgage Matrix®, call 770-419-9891 or email info@MarketNsight.com. For information about MarketNsight and John Hunt’s upcoming speaking engagements, visit www.MarketNsight.com.