07/11/2023
Nation’s Housing Market Report for July 11, 2023
Home Buyer Information
It is unquestionable that the housing market in most areas of the United States has reignited as home prices in 27 of the 50 largest markets in the country have now risen for six consecutive months. In the 23 markets where prices are still below pre-pandemic peak levels, recent trends show the gap has closed in 2023. The trend upward is further fueled by the fact that available inventory is limited as inventory in some major markets is more than 50% below pre-pandemic levels. And even where inventory is available, the median price for a single-family home, now at $350,000, rose 10% from the first quarter to the second quarter in 2023. The result is that housing is becoming unaffordable as over 75% of the homes on the market today are too expensive for the middle-income buyer, the nation’s largest sector of home buyers.
Further exasperating the matter is the fluid mortgage rate as the Feds continue to raise rates to curb inflation. Today, the average mortgage payment for a median priced home is approximately $2258 per month. It takes roughly 37.5% of median household income just to make the average payment. The rising interest rates is a two-edged sword in that homeowners who would otherwise place their homes on the market for sale are not about to exchange an interest rate of 2-3% for a mortgage rate of 7.125%.
Rents too have exploded across the nation. It is not uncommon to see rents ranging anywhere from $1500 to $2500 per month. With an influx of millions of individuals, the housing shortage will only worsen, and prices will continue to increase. Either scenario can be viewed as disheartening or an awakening and an immediate call to act while options are still available. The alternative may be preclusion from home ownership and being subjected to paying rent to others for a lifetime.
As an individual with a degree in economics, and after spending more than 25 years in the real estate and mortgage industries, the trend depicted above clearly indicates a redistribution of wealth is in effect. When home prices are near all-time highs, thereby effectively limiting the property available to the middle-income borrower, and prices are still projected to rise, the writing on the wall indicates the wealthy and major corporations will become landlords for many families unless action is taken soon.
Through conversation with our clientele, the reoccurring theme is home buyers believe pending foreclosures will bring down home prices and interest rates will fall soon making home ownership more affordable. Unfortunately, the trend and recent indicators suggest home prices will not only rise but are projected to spike in many areas. E.g., in Bend, Oregon, home prices have increased on average nearly 8% per month for the last three months. In addition, the impending foreclosure boom has yet to materialize as lenders too seem to be anticipating a spike in home values and are holding onto R.E.O. assets for extended periods of time. On the other hand, even if home prices were to dip enough to realize an actual saving, the continued shortage of homes available for sale would most likely keep any decline in home prices modest. Furthermore, the Feds would need to abstain from raising mortgage rates to realize any savings and with inflation hovering a little over 4%, that move is most unlikely, at least for the near future.
Edward Hernandez, PA, EA, JD.
Pacific Coast (PAC-CO) REALTY Broker of Record
