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As spring wears on, the housing market continues to be lackluster on many fronts. While the median price of homes in May was up 0.9 percent annually, according to Realtor.com, many other market indicators remain sluggish or less than promising. Inventory growth has been slowing for three straight months, with fewer potential sellers interested in entering the market. At the same time, the homes that do get listed for sale are spending more time waiting for a buyer than they did this time last year. Here’s a closer look at the May 2023 housing market dynamics.
Big-picture housing market updates
The most recent inflation data reflects a rate of 4.9 percent, according to the Consumer Price Index (CPI) released in May. That’s a significant drop from 6.4 percent at the start of the year, but still higher than the Federal Reserve’s stated goal of 2 percent. Housing continues to be one of the most significant contributors to inflation overall — the shelter index has increased 8.1 percent over the past 12 months.
Meanwhile, the Fed has so far continued its pattern of hiking interest rates to curb inflation. At its most recent meeting in May, it raised rates for the 10th straight time. As a result, mortgage interest rates remain in fairly steep territory. Though there’s been talk of the rate hikes coming to an end, it remains to be seen what move the Fed will make at its next meetings in mid-June.
With high interest rates creating less than favorable conditions for both buyers and sellers, the market is naturally cooling — but a housing crash remains highly unlikely. Yes, things may be shifting and course-correcting somewhat, but it’s not drastic. Today’s market is unlike the housing bubble of 2008 for a variety of reasons, including much stricter lending standards than were in place back then.
Monthly housing market metrics
- Home sales: Existing-home sales declined 3.4 percent month-over-month between March and April 2023, to an annual rate of 4.28 million, according to National Association of Realtors (NAR) data. Year-over-year, though, the dip is much more substantial, down 23.2 percent.
- Median prices: The nationwide median home price for April was $388,800, representing the third consecutive month of year-over-year declines after a long streak of rising.
- Home Price Index: However, the most recent Case-Shiller U.S. National Home Price NSA Index, released May 30, reported a housing price increase for the second month in a row. Home-price growth rose 1.3 percent in March 2023, a positive step forward from February’s more modest 0.2 percent increase.
- Mortgage rates: According to Bankrate’s national survey of large lenders, the average mortgage interest rate on a 30-year loan stands at 6.91 percent (as of early June).
Housing market for sellers
While late spring and early summer are historically the busiest times of year for real estate, this year’s housing market is so far not holding true to that pattern. NAR data from mid-May shows existing-home sales declining in all four major regions in the country, both month-over-month and year-over-year. The West continues to experience the most significant market cooling, down more than 30 percent from last year, followed by the Northeast. However, these two regions still command the highest median prices, at $578,200 and $422,700 respectively, while the South’s median sits at $357,900 and the Midwest’s at $287,300.
Some of the areas where prices are dropping the most sharply are the ones that were very steep to begin with. In San Francisco, for example, Redfin data shows that the median sale price has plummeted 17.8 percent since April of last year — but even with the double-digit decline, it’s still a sky-high $1.325 million.
So should you sell now or wait for things to shift more in your favor? It all depends on your financial and life circumstances, of course, but the good news is that buyer demand still far outweighs supply. The country has just a 2.9-month supply of inventory, according to NAR, which is far short of the 5 to 6 months needed for a balanced market. That keeps sellers in the driver’s seat, at least for the present.
Housing market for buyers
Mortgage interest rates remain daunting, which reduces your purchasing power as a buyer. At the same time, inventory is extremely limited in many places. This creates challenging conditions for prospective buyers, many of whom are waiting things out on the sidelines for now.
One silver lining is that prices in many popular markets are easing as compared to last year. In Seattle, for instance, prices have declined about 9 percent year-over-year, per Redfin. The decrease is 13 percent in Denver, 8 percent in Las Vegas and 5.4 percent in San Diego.
Another factor working in buyers’ favor is what’s referred to as days on market, or the length of time homes spend on the market before selling. Per NAR, the typical property in April spent 22 days on the market. That’s 17 days longer than this time last year. This metric can vary greatly from one city to another, but generally, the longer a property languishes on the market, the more likely the seller might be to negotiate on price in order to get a deal done.
If you’re wading into the real estate market this spring, it’s important to do your research. Current market dynamics are complex and evolving rapidly, and they can differ wildly by location. Sellers should make sure they have a realistic understanding of what their home is worth under current circumstances — and buyers should crunch the numbers to understand exactly how much house they can afford. Getting preapproved for a mortgage can also be very helpful, to give you an idea of the amount a lender would be willing to offer you. Whichever side of the transaction you’re on, working with an experienced local real estate agent can help you navigate the market more successfully.