"Homebuyers Holding the Reins: Is the 2023 Housing Market at a Turning Point?"

The dynamics of the housing market appear to be shifting in favor of homebuyers in 2023, as housing inventory starts to show signs of recovery. Despite still being relatively low, the housing inventory has been...

The dynamics of the housing market appear to be shifting in favor of homebuyers in 2023, as housing inventory starts to show signs of recovery. Despite still being relatively low, the housing inventory has been slowly climbing, potentially giving buyers more leverage in their purchasing decisions.

According to a report released by the National Association of Realtors, existing-home sales have experienced a twelve-month decline, with a staggering 37% drop in year-over-year sales. In fact, January witnessed the largest decline since 2010. Lawrence Yun, the Chief Economist at NAR, stated, "The current sales activity is even lower than the lockdown month in April 2020. Home sales are bottoming out."

However, the prices of homes vary across different markets based on affordability. While lower-priced regions have seen modest growth, more expensive areas have experienced declines in prices. This market disparity highlights the importance of location and affordability for potential homebuyers.

Despite the challenges, there is a glimmer of hope for buyers. Housing inventory at the end of January increased by 2.1% from the previous month and 15.3% from the previous year, reaching a total of 980,000 units. Unsold inventory represents a 2.9-month supply, which is unchanged from December but up from 1.6 months in January 2022.

Yun further adds, "Inventory remains low, but buyers are beginning to have better negotiating power. Homes sitting on the market for more than 60 days can be purchased for around 10% less than the original list price." This indicates a gradual shift in the balance of power in favor of homebuyers.

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Lisa Sturtevant, the Chief Economist at Bright MLS, explains that the recent increase in housing inventory is primarily due to a pullback in new purchase contracts rather than a surge in new listings. Many current homeowners hesitate to list their homes for sale, especially when their mortgage rates are below 3%. Although there is more inventory available compared to a year ago, it still remains at half the pre-pandemic level.

Are Home Prices on the Decline?

Contrary to the decline in home sales, the median existing-home price for all housing types in January rose to $359,000, reflecting a 1.3% increase from January 2022. Home prices have consistently increased, with three out of four U.S. regions experiencing growth, except for the West. This marks the longest streak of year-over-year price increases, spanning 131 consecutive months.

The State of Mortgage Rates

Mortgage rates have seen a consecutive two-week increase, driven by a resilient economy, particularly due to consumer spending. The average rate for a 30-year fixed-rate mortgage rose to 6.32% for the week ending February 16, compared to 3.92% a year ago. The increase in mortgage rates has contributed to the decline in sales activity, influencing the state of the housing market.

Cash Buyers Taking Advantage

Properties spent an average of 33 days on the market in January, compared to 26 days in December and 19 days in January 2022. In January, 54% of homes were sold within a month of being listed. Cash buyers accounted for 29% of transactions, an increase from the previous month and year. Individual investors and second-home buyers, responsible for many cash sales, purchased 16% of homes, demonstrating their continued presence in the market.

Condo Prices Outpacing Single-Family Homes

The median existing single-family home price reached $363,100 in January, reflecting a 0.7% increase from January 2022. In contrast, the median existing condo price rose by approximately 5% to $320,000 during the same period. Single-family home sales declined by 0.8% from December to a seasonally adjusted annual rate of 3.59 million, representing a 36% decrease from the previous year. Existing condominium and co-op sales remained unchanged from December, but saw a significant 43% decline compared to last year.

In conclusion, the 2023 housing market showcases a gradual shift where homebuyers are gaining more influence. Although home sales have been declining, the rise in housing inventory and the potential for negotiation are positive indicators for buyers. However, prices continue to rise, and mortgage rates have increased, presenting challenges for those looking to enter the market. With cash buyers still active and the condo market outpacing single-family homes, the housing market remains dynamic and ever-evolving in 2023.

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