U.S. Housing Market Freeze
What a rough year it has been for the real estate market. Coming from a place of straight euphoria into a place of higher rates and higher prices spelled disaster for both buyers and sellers. The decade-long boom in U.S. housing is finally over, as we have seen the first month of declines in home prices in 14 years. During this, the housing market has been eerily quiet. Here is how the U.S. housing market freeze can impact both buyers and sellers in 2023.
With buyers continuing to leave the market, and sellers being stuck where they are, the U.S. housing market freeze is taking root. Not only are buyers and sellers becoming more hesitant to find a transaction, real estate agents who shinned in 2020-2021 are now looking for backup careers.
We have seen a home price decline in some of the hottest markets, while Louisville, Kentucky remains on solid footing – for now. Soaring mortgage rates have caused the U.S. housing market freeze, and there does not look like an immediate end in sight. However, luckily for buyers and sellers alike, there is some signs that mortgage rates will decline. The housing freeze is almost all because of the Federal Reserve’s inflation fight and monetary policy tightening. The real estate market has not been in this much turmoil for years, and leaner times are ahead in the market.
The Comparable Sales
While year-over-year numbers are not the best comparison based off independent variables, it does show a switch in trend. This October, sellers listed 24% less than the year prior. It is worth noting, however, that there was close to a record number of listings in every month of last year. Year-over-year comparable analysis do not tell the whole story, but do tell one of a changing mantra in housing. It is also worth noting that purchases also sank 17% Y-o-Y. This shows that not only are less listings available, but there are also less buyers. Quite the opposite of last year having seemingly unlimited buyers and motivated sellers.
Even now, with prices and rates topping out, housing has never been less affordable. In fact, it will take close to $100,000 a year in earnings to be able to afford a median-sale-price home. Trying to convince a seller who is locked in at a 3% mortgage to sell into a 7% mortgage is foolish. This has led to the largest housing freeze we have seen in years, and will likely continue in 2023. Next year will be a challenging year for real estate, and the data will show that coming soon.
U.S. Housing Market Freeze Impact
With most home buyers and sellers holding out, we will likely switch into a neutral market coming into Q1 and Q2 of 2023. Homeowners are waiting for a more meaningful decline in rates to sell. Home buyers are potentially doing the same, but also are more worried about elevated prices. It seems like the overall consensus of the U.S. housing market freeze is that things will change once something gives: buyers, sellers, prices, or rates. It is important to recognize we are likely only in the beginning of the business cycle shift, meaning more pain for consumers around the corner.
We will likely see an even tighter market in the new year as real estate prices and rates will go hand-in-hand with a labor slowdown. While it is sad to say, there is a chance that millions of people may lose their jobs next year. This will provide even more strain on an already weak and frozen housing market. I have personally seen homes that would have sold in a weekend last year, be on the market for over 45 days this year.
What To Expect
With buyers retreating, sellers waiting, rates climbing and prices plateauing, we will likely see a different market soon. It is important to remember just how crucial working with a professional can be in this market. Any agent at Premier Homes Team is willing to help with the sale of your home or the purchase of your future home. Change is coming to the housing market in 2023, but is it the change we really expected?