Today’s housing market is in deep decline by many standards, but recent real estate statistics suggest that something more serious may be ahead – that the market may be nearing a bottom of sorts.
“Overall, this week’s data is in line with other indicators that point to a potential bottom in housing activity at a fairly low level,” said Realtor.com® Chief Economist. Daniel Hale in her latest analysis.
The only advantage we can think of is that there is usually nowhere to go from there but up. Does this mean the worst days in real estate are about to end? Not exactly, as the main four predictors of the housing market—housing prices, inventories, days on the market, and mortgage rates—are showing no signs of recovery yet.
“They don’t yet give a strong indication of how long the market will bounce off the bottom,” explains Hale.
In other words, we can wallow in this strange new hell for a while.
But that doesn’t mean it’s all hopelessness and despair. We take a look at what all of this means for homebuyers and sellers alike in our “How’s the Housing Market This Week?” column.
Rising mortgage rates hurt the housing market
Deep winter has actually become a signal that homebuyers are optimistic. The National Home Builders Association recently reported that more people are visiting new homes to buy for the second month in a row. In addition, the number of people waiting to sign housing contracts jumped in January. This suggests that sales volume will be higher in the coming months as buyers and sellers sign a contract and close the deal a few weeks later.
But with rising mortgage rates, this burst of enthusiasm may not last long.
Interest rates on 30-year fixed-rate mortgages averaged 6.65% in the week ended March 2, according to Freddie Mac data, marking a fourth straight week of growth. And it weighs heavily on homebuyers who are desperately fighting to stay afloat financially.
Housing prices are also not very cooperative. Annual growth is slowing, meaning an economist can say that it is not growing as fast as, say, last fall. But they are still rising — up 7.2% in the week ended Feb. 25 compared to the same week a year earlier.
In February, the average price of homes for sale was $415,000. Compared to February 2022, paying for a typical home costs $630 more per month, which may just be too much for some buyers.
Why home sellers gave up
Every week for the past nine months, fewer homeowners have listed their properties for sale than they did in the same period a year ago, and the last week of February was no exception.
For the week ending Feb. 25, new listings were 16% lower than in 2022, meaning buyers have less “fresh potential,” according to Hale.
“Fresh” might be the key word here. If you look at All listings, not just newbies entering the market, in fact more homes for sale on the market right now than a year ago – 67% more to be exact. But many of these properties have been on the market for much longer, averaging 19 days in the last weekly tally. In fact, the pace of sales has been slowing down for 30 consecutive weeks. This means that buyers have already seen most of these ads and decided to move on.
However, despite the seeming abundance of outdated lists, it is also important to remember that there are only half in general, as many homes for sale as there were before the COVID-19 pandemic.
Another big revelation? The housing market may slow down, but it is still faster than before the pandemic.
“Using time in the market as a guide, today’s housing market is halfway between its most frenetic period a year ago and what was typical of the pandemic era frenzy,” explains Hale.
In other words, our entire frame of reference of what counts fast, slow, surplus or a lack of housing has changed.
This shift in perspective could help “explain why both buyers and sellers are feeling cold this spring home buying and selling season,” Hale says.
So when will this dark period in housing end?
“Mortgage rates are likely to play a major role in determining whether the market slows down further slowdown or picks up speed,” predicts Hale.