Rates & The Fall Housing Market

After a continuous rise over five straight weeks, we finally see a dip in mortgage rates. As of the week ending Aug. 31, the rates for 30-year fixed-rate loans averaged at 7.18%. While this is slightly down from the previous week's 22-year peak of 7.23%, it's substantial enough to make potential homebuyers think twice and discourage current homeowners from selling.

The current real estate environment presents a few challenges. Buyers are navigating through high home prices, limited property availability, and significantly elevated mortgage rates. Conversely, sellers are reluctant to sell due to the potential of letting go of their existing, lower mortgage rate for a higher one.

Let's delve deeper into the current real estate statistics, assess the lukewarm summer real estate activity, and anticipate the upcoming fall season.

The Reluctance of Home Sellers

Until we see a notable decline in mortgage rates, many homeowners may feel constrained by their existing low mortgages, despite a desire to relocate. This sentiment contributes to a tangible shortage in the housing market, leaving prospective buyers with limited options.

For instance, as of the week ending Aug. 26, there was an 8.8% decrease in new listings compared to the previous year, marking a consistent decline over 60 weeks. Overall housing inventory (encompassing both new and older listings) is also 5.9% below what was observed last year.

Persistently High Home Prices

The scarcity in property listings contributes to sustained high home prices, offering little respite to prospective buyers. In August, median list prices were around $435,000. Although there was a decline in June and July, prices remained consistent as of the week ending Aug. 26 when compared to the same period last year. This balance between the demand for more affordable homes and the limited property availability has maintained prices close to last year's figures.

However, for those seeking growth in listings and reasonable price points, new constructions might be the answer. There's been a noticeable effort by builders to meet demand by increasing their new construction activities.

Changing Dynamics of Real Estate Sales

Despite the challenges of high mortgage rates, lofty home prices, and limited choices, there's a noticeable eagerness among buyers to finalize purchases. A clear indication is the pace of property sales. Although it has been reducing over the past 58 weeks, there's a hint of it picking back up.

For the week ending Aug. 26, homes were on the market only two days longer than the same period the previous year, a significant improvement from four days the prior week and six days the week before that. If this trend persists, the fall could witness homes selling at a faster pace than last year, suggesting a shift in market dynamics.

What's In Store for the Fall Housing Market?

Those aspiring for a surge in property listings this fall might need to temper their expectations. Predictions suggest a 5% drop in the inventory of existing homes for sale in 2023 compared to 2022. And even if there is some positive movement, new listings are still lagging by more than 20% from the usual pre-pandemic levels observed during this season, which might result in further price escalation in the upcoming weeks.