Exploring the U.S. Housing Market: Insights from Existing Home Sales and Expert Analysis

Introduction The U.S. housing market has been a topic of interest for many, as it plays a crucial role in the overall health of the economy. Recent data on existing home sales and insights from industry experts shed light on the current state of the market and its potential trajectory. In this article, we will delve into the numbers, analyze the factors influencing the market, and explore the perspectives of Brad Case, the Middleburg Communities’ chief economist.

Existing Home Sales: January 2023

• Existing home sales expanded by 3.1% in January 2023, reaching a seasonally adjusted rate of approximately 4 million sales.
• However, sales declined by 1.7% compared to January 2022.
• The median existing home sales price rose by 5% from January 2022 to $379,100.

Factors Influencing the Market

1. Limited Inventory:
   • Inventory remains extremely limited, as homeowners with lower mortgage rates are reluctant to put their homes on the market.
   • This scarcity of available homes has led to increased competition among buyers and higher prices.
2. Mortgage Rates:
   • According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.77% as of February 15th, 2023, up from 6.64% the previous week and 6.32% a year ago.
   • Higher mortgage rates have impacted home buyers, making it more challenging to afford homes.

Expert Analysis: Brad Case, Middleburg Communities’ Chief Economist

1. Positive Outlook:
   • Brad Case views the 3.1% increase in existing home sales during January as good news, indicating that the owner-occupied housing market may not drag down the entire economy.
   • Despite recent price declines and weak sales numbers, this data provides hope for a healthier housing market.
2. Recovery Timeline:
   • Case believes that the Fed is unlikely to cut rates anytime soon, which means mortgage rates will not decrease significantly in the near future.
   • He advises home buyers to focus on finding a house they want to live in, rather than waiting for substantial declines in mortgage rates.
3. Demand and Inventory:
   • There has been an increase in demand for both owner-occupied and renter-occupied housing.
   • However, existing homeowners are hesitant to put their homes on the market due to the prospect of higher mortgage rates.
   • Case suggests that existing homeowners need to acknowledge that their assets may not be worth as much as they had hoped, which could help increase inventory and benefit the entire market.
4. Regional Shifts:
   • The southeastern part of the U.S. has seen an increase in migration, driving up demand for housing on both the owner and renter side.
   • The biggest increase in demand comes from people moving out of their parents’ homes or shared living situations, which is not dependent on mortgage rates.
5. Rental Market:
   • The rental market has experienced higher demand growth than predicted, driven by people forming new households.
   • While rents have not increased significantly over the past year, people are finding it easier to rent compared to the astronomical prices in the owner-occupied space.
6. Wage Growth and Affordability:
   • Wage and income growth have been strong, supporting the increase in house prices and preventing concerns about a housing bubble.
   • Although people are not accustomed to paying such high amounts for rent, mortgages, or houses, the growth in wages and income has made it possible for them to afford housing, whether rented or owned.

Conclusion

The U.S. housing market continues to face challenges, such as limited inventory and higher mortgage rates, which have impacted affordability for home buyers. However, the recent increase in existing home sales and the strong demand for both owner-occupied and rental housing provide a glimmer of hope for a healthier market. As wage and income growth continue to support housing prices, it is crucial for existing homeowners to adjust their expectations and consider putting their homes on the market to increase inventory and benefit the entire market. While the recovery timeline remains uncertain, focusing on finding the right home rather than waiting for significant declines in mortgage rates may be the best approach for prospective buyers.