The first quarter of 2023 has rather brought some significant changes in the real estate market. These changes affected several key areas of the market. These include median home prices, closed sales, new listings, inventory supplies, house repairs, and so on. But we will know later whether the changes drove house prices up or down.
By comparing only the number of closings to the past few years, we can say that the first quarter of 2023 indicates a less active housing market.
To provide a comprehensive analysis of the current state of the market, we will dive deeper into specific areas so that you can understand whether it was a good decision for home buyers to purchase a new home.
Insight on Median Home Price
It is no surprise that there has been a dramatic increase in home values during the past few years. While that might be true, it was not the case for the first quarter of 2023. Instead of increasing, we noticed a drop in median home prices.
Back in 2022, in the first quarter, there was an increase of 25% in medium home prices. This increase remained constant for many years, until 2023. In Q1 of 2023, the values of average homes started to decline by an initialization of 5%. Because of the increase in the supply of homes and the decrease in home demand, this drop was initiated.
This drop might be good news for new home buyers, but it is certainly not for the sellers. They may find it difficult to sell homes for their desired prices if this decrease in home prices continues. Additionally, sellers waited longer to sell a single home due to this decline in Q1 2023.
Insights on Closed Sales
If we compare the first quarter of 2022 with the first quarter of 2023, we can see a notable change. Although the number of closed sales has decreased in both periods, it was 5.6% in 2022 and 10% in 2023.
Closed sales have decreased for the same reason that the median price of homes has decreased. When closed sales decrease, it can be hard for the sellers to sell their homes. They may need to lower the asking price to attract customers. In contrast, this became an excellent opportunity for the buyers to buy a new home at the time.
Insights on New Listing
Unlike the above two factors, there has been an increase in the number of new listings. In Q1 of 2023, the number of new listings increased by 15% compared to the same period last year, which was rather an 8.2% decrease.
This happened because of several factors, including the construction of new homes and the tendency to put more homes in the less active housing market. Again, this is great news for the buyers but not for the sellers. With more homes on the market, sellers are bound to sell their homes at competitive prices.
Insights on Active Owners vs. Renters
Although there was a drop in the median home value, the number of renters slightly increased in the first quarter of 2023. Reidville, SC has been an interesting housing market for this reason. After an in-depth analysis of the property price in Reidville, here’s what we found about the percentage of owners compared to renters,
The pie chart suggests the total number of renters was 68%, whereas the number of owners was 32%. Overall, this can be beneficial to homeowners, as they can buy more homes cheaply and rent them.
Insights on Inventory Supply
The less active housing market in the Q1 of 2023 has also impacted the inventory supply. During the same period in 2022, the month’s inventory supply was down 15.9%. For this year’s Q1, it increased rather than decreased. There has been a 20% increase in the supply of homes.
Again, the buyers win in this situation. Due to the increase in inventory supply, they found more options on the market at affordable prices. However, sellers had to lower home prices to stay competitive.
Insights on House Repairment
The Q1 of 2023 was not easy for the sellers. They had to undergo major renovations and repairs to their homes to maintain their positions as market leaders. Repairs didn’t make as many changes as they could in the past due to new listings, a decline in the median property price, an increase in inventory availability, and a fall in closing sales.
In the last 6 months, their losses have increased due to the increase in repair costs. According to Tidewater Construction, here is a breakdown of the increase in home repairs,
- Insulation service costs increased by 48%
- HVAC service costs increased by 13%
- Roof service costs increased by 10-16%
- Prices of garage doors increased by 54%
- Prices of cabinetry increased by 19%
- Prices of gutters increased by 26%
- Prices of soffits increased by 45%
- Prices of drywall boards increased by 17%
- Prices of tiles and hardwoods increased by 5%
- Prices of trusses increased by 63%
Real Estate Market Trend in the First Quarter of 2023
US single-family home sales
Image: seekingalpha.com
By the beginning of 2023, there had been some changes in the real estate market. Experts think these changes may turn into trends and are likely to continue for the next few months. These trends will affect both home buyers and sellers.
Let’s see the first trend…
Low Home Inventory (Yet Growing)
It is common that the real estate market always deals with a low home inventory. However, it has taken a turn since May 2022. The new homes are just adding to the list. As a result, people saw a significant increase in November 2022. We assume the number will likely grow in the future.
Annual Rise in Home Value
Although we saw a drop in median home prices in the first quarter of 2023, this may not be the same for the entire year. If we look at the previous years, we can see that the median house price rose by 11% to $416,000 nationwide in November 2022.
Still, this rate falls short of the June and July average of a 16% yearly increase. This might indicate that the rate of increase in property prices is slowing down. Thus, 2023 will likely be a year of fairly modest development.
Higher Interest Rates on Mortgage
After 2021, the interest rates on mortgages will only continue to rise. Mortgage interest rates significantly increased in just one year when the Federal Reserve raised them in 2022. As a result, the typical 15-year fixed-rate mortgage increased from 2.8% to 6.36% by 2022. Additionally, in October 2022, the 30-year fixed-rate mortgage climbed to 7.08%.
The Popularity of Risky Buying
Undoubtedly, the options for buying property are increasing, and so are the risky ones. More people are now opting for risky home-buying options like rent-to-own agreements and down payment loans.
Always remember, a rent-to-own arrangement is a terribly stupid way to purchase a property. As for down payment loans, you need to account for at least 5% to 20% of the home’s worth.
Real Estate Services are Going Online
Just about everyone knows about popular real estate websites like Zillow or Realtor.com. Online real estate services are booming for many benefits, most of which are for realtors. It is becoming easier to buy and sell properties due to third-party buyers, using virtual agents, and closing deals online. So, this trend won’t go away anytime soon.
While the less active housing market of the first quarter of 2023 was challenging for some, it also provided opportunities for buyers. Both buyers and sellers need to stay informed as the market continues to adjust. Depending on the market condition, buyers can always work with skilled real estate agents to navigate challenging landscapes successfully.
