October Housing Market Update: A Tale of Two Markets Amid High Rates and Stalled Sales

Oct 17, 2023, 11:46 AM by Nuvision 

Housing Report

The following article includes views from Reports on Housing by Steven Thomas and other economic experts. It is not a reflection of the opinions, views, or predictions of Nuvision and its representatives. 

As we head into the final quarter of 2023, the U.S. housing market is undergoing a significant slowdown, with experts predicting the worst year for home sales since the housing bubble burst in 2008. While high mortgage rates and rising home prices are making homeownership increasingly unattainable for many, existing homeowners with low mortgage rates are enjoying significant equity gains. The result is a market of stark contrasts, pushing buyers and sellers to opposite ends.

The Market's Slow Pace

According to projections from the National Association of Realtors (NAR), total existing home sales for 2023 are expected to be around 4.1 million, the lowest figure since the subprime mortgage crisis of 2008. In contrast, there were more than 6 million home sales in 2021. High mortgage rates and steep home prices are cited as the primary culprits behind this downturn. Andy Walden, vice president of enterprise research for ICE Mortgage Technology, recently noted that U.S. incomes would have to surge by an unlikely 55% for the housing market to be considered affordable.

No Distress, No Crash

However, not all experts are ringing alarm bells. Steven Thomas, a real estate expert, argues that the current state of the market should not be a cause for widespread panic. According to Thomas, homeowners across the U.S. are financially healthier than ever, a trend likely to prevent a wave of distressed sales and a housing market crash.

Thomas pointed out that while mortgage rates have risen to levels not seen in nearly a quarter-century, the underlying economic conditions are markedly different from those that led to the Great Recession. He stated that, unlike the subprime mortgage bubble that precipitated the 2008 crisis, today's homeowners are generally not high-risk borrowers.

A Tale of Two Markets

Adding to the situation, Fannie Mae CEO Priscilla Almodovar described the current housing landscape as a "tale of two markets." According to her, existing homeowners are in a favorable position, most likely enjoying a lot of equity in their homes with mortgage rates between 2% and 4%. A June analysis by Redfin corroborates this, stating that roughly 92% of U.S. homeowners with mortgages have a rate below 6%.

However, this is leading to a lock-in effect where homeowners are reluctant to sell, further exacerbating the already low inventory issue. The number of homes for sale decreased by 4% in September compared to the same time last year, according to Realtor.com. On the other hand, potential buyers are grappling with mortgage rates at their highest levels in 23 years, along with the problem of low inventory, creating a difficult environment for those wishing to enter the market.

Here's the updated snapshot of the national housing market, according to the latest statistics from organizations such as the National Association of Realtors, Redfin, Freddie Mac, and The Mortgage Reports:

  • The median price for existing home sales stands at $407,100, marking a 3.9% increase compared to last year.
  • Homes currently on the market have a median asking price of $389,950, which is up by 4.6% year-over-year.
  • The existing home sales are occurring at a seasonally adjusted annual rate of 4 million, representing a 15.3% decline from the previous year.
  • The supply of unsold existing homes has shrunk to 1 million, equivalent to 3.3 months' worth of inventory, a decrease of 14.1% compared to last year.
  • The proportion of homes selling for more than the listed price has risen to 31.2%, up from 30% last year.
  • First-time buyers accounted for 29% of all home sales, a minor drop from 30% in July.
  • Over the last year, homebuyers with a monthly budget of $3,000 have diminished their purchasing power by $40,000.