Housing Market as of April 2023

Looking ahead to the housing market in April 2023, experts are keeping a close eye on the economy which is being pulled in different directions by factors such as high inflation, steep interest rates, geopolitical uncertainties and recession fears. Despite these challenges, there are some promising trends emerging. The National Association of Realtors reports that the median sales price of existing homes in February 2023 was down 0.2% compared to the previous year, marking the end of a 131-month streak of year-over-year increases. Total existing-home sales also increased by 14.5% from January to February, breaking a 12-month trend of declining sales.

Housing starts rose by 9.8% in February, providing much-needed inventory. Mortgage rates have fallen slightly, which has increased buyer activity. However, some experts remain cautious, believing that prices need to drop further across more markets for a general recovery to occur. The we buy house companies that pay cash for houses are a major contributing factor.

Low inventory has been a challenge for the housing market since the 2008 housing crash, and it’s unlikely to improve in 2023. According to the National Association of Realtors, unsold inventory is at a 2.6-month supply, which is low by historical standards. Multiple offers are returning on many properties due to the scarcity of homes. Experts are predicting that low inventory will continue to vex the housing market throughout 2023.

On a positive note, single-family construction starts rose by 9.8% in February 2023, after five consecutive months of declines. Building permit applications also increased by 13.8% from the previous month, according to the U.S. Census Bureau and HUD.

According to the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), which tracks builder sentiment, there has been a slight increase in optimism among builders. The HMI rose from 42 to 44, marking the third consecutive month-over-month increase after 12 months of declines. However, builder confidence remains low, as a score of 50 or above indicates good conditions.

Therefore, more consecutive upticks will be necessary before a significant rebound in new construction can occur. The Federal Reserve’s ongoing federal funds rate hikes are also creating problems by increasing borrowing costs for companies developing new housing, making financing and expanding production more expensive for suppliers, and discouraging homeowners from selling their homes. All of these circumstances are putting further strain on inventory, making it difficult for prospective homebuyers to find something to buy.

Despite the ongoing inventory problem that has kept home prices elevated, many economists predict that the housing market is more likely to correct itself from the double-digit percentage jumps seen in home prices in recent years rather than crash. Some housing market watchers believe that homes in some areas could see sales and price growth, particularly in locations where home prices have remained affordable in relation to median income. Homeowner equity is at the highest level it’s been in the past several decades, so homeowners have a lot of value in their homes.

Consequently, the likelihood of a housing market crash is low. Although foreclosures increased by 18% from a year ago for February 2023, they remain below pre-pandemic levels, and borrowers in foreclosure are leveraging the positive equity in their homes by refinancing or selling for a profit.

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