It’s October 2023. What do real estate investors, wholesalers, and real estate agents need to know about the current market?
As of October 2023, home prices are up 2.8% year-over-year. The median sales price sits at $394,300, according to the September data release from NAR, and is down from a record-setting $407,100 in August 2023.
Inventory is slowly increasing as eager buyers and sellers are ready to make some moves. Mortgage rates appear to be riding the top of their wave, touching 8 percent in October but are expected to decrease into 2024. And yet despite all these factors, there are plenty of active markets seeing homes getting multiple offers and investors have not slowed down.
New Western tracks investor activity by market. These are the markets where New Western saw the biggest increases in activity from September 2023 to October 2023.
The top 5 markets that experienced the biggest increase in investor activity in September:
Birmingham, Alabama
Fort Myers, Florida
Saint Louis, Missouri
Columbus, Ohio
Salt Lake City, Utah
And for October 2023, the 10 markets that have experienced the biggest increase in investor activity:
Philadelphia, Pennsylvania
Raleigh, North Carolina
Columbus, Ohio
Washington, D.C.
Nashville, Tennessee
Jacksonville, Florida
Orlando, Florida
Central Florida
Charlotte, North Carolina
Virginia Beach, Virginia
Let’s take a look at the stats on the current housing market.
Existing Home Sales
Existing-home sales moved lower 2.0% in September and 15.4% from one year ago. Inventory actually climbed 2.7% from September to August and unsold inventory sits at 3.4-month supply at the current sales pace, up from 3.3 months in August 2023 and 3.2 months in September 2022.
Properties typically remained on the market for 21 days in September, up from 20 days in August and 19 days in September 2022. Sixty-nine percent of homes sold in September were on the market for less than a month.
The median existing-home sales price grew 2.8% from one year ago to $394,300, marking the third consecutive month of year-over-year price increases. And lower than the record setting median-existing home sale price of $407,100 last month.
All four U.S. regions posted price increases.
“For the third straight month, home prices are up from a year ago, confirming the pressing need for more housing supply,” said NAR Chief Economist Lawrence Yun.
Pending Home Sales
Pending home sales were 7.1% lower from July to August following a slight uptick that happened from June to July. All four U.S. regions posted monthly losses and year-over-year declines in transactions.
According to the National Association of Realtors Pending Home Index, transactions fell by 18.7% year over year.
“It’s clear that increased housing inventory and better interest rates are essential to revive the housing market,” said NAR Chief Economist Lawrence Yun.
New Home Sales
Single-family starts posted a solid gain in September as more buyers are turning to new homes because of a dearth of inventory in the resale market.
But in another sign that higher interest rates have slowed the market, the number of single-family homes under construction in September was 674,000, which is almost 15% lower than a year ago.
New Home Sales Price
The median sales price of new houses sold in August 2023 was $430,300. The average sales price was $514,000.
For Sale Inventory and Months’ Supply of New Homes
The seasonally‐adjusted estimate of new houses for sale at the end of August was 436,000. This represents a supply of 7.8 months at the current sales rate.
“Despite ongoing challenges in the market, the housing deficit of resale inventory continues to provide some market support for builders,” said NAHB Chief Economist Robert Dietz. “Because of a lack of existing homes in the marketplace, 31% of homes available for sale in August were new construction.
Who are the buyers in the market according to the September data release from NAR?
First-time buyers were responsible for 27% of sales in September, down from 29% in August 2023 and September 2022.
All-cash sales accounted for 29% of transactions in September, up from 27% in August and 22% in September 2022.
Individual investors or second-home buyers, who make up many cash sales, purchased 18% of homes in September, up from 16% in August and 15% one year ago.
Distressed sales – foreclosures and short sales – represented 1% of sales in September, unchanged from last month and the previous year.
What about those mortgage rates?
Mortgage rates are headed towards 8% at the present time and that has raised interest in the adjustable rate mortgage. The ARM share was 9.3 percent, the highest share in 11 months, as some borrowers look for alternative ways to lower their monthly payments. Refinance activity was at its lowest level since early 2023 as mortgage rates are at multi-decade highs.
“Both purchase and refinance applications declined, driven by larger drops for conventional applications. Purchase applications were 21 percent lower than the same week last year, as homebuying activity continues to pull back given reduced purchasing power from higher rates and the ongoing lack of available inventory,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist.
MBA Vice President Joel Kan also projects that mortgage rates are predicted to go down into 2024 following the FED’s signal to pause rate hikes.
Where are rental rates headed?
September marks the sixth straight month that rents changed, only very little year over year. The U.S. median asking rent is currently $2,011 in September and that is a decrease from August by 2%.
“Rents have flattened because a boom in apartment building in recent years has flooded the market with supply, but they haven’t yet posted a substantial decline because there’s still demand for rentals—especially as high mortgage rates keep many would-be homebuyers and sellers on the sidelines,” said Redfin Economics Research Lead Chen Zhao.
New apartment building has slowed, but landlords face competition from individual homeowners who are renting out their homes instead of selling, often times because they don’t want to lose their low mortgage rate or didn’t get a good offer when they tried to sell.
While an increase in supply is affecting the rental market, slowing household formation and economic uncertainty also contribute to the affect on rental rates.
In other words, the rental market will continue to be a viable option for investors who explore multiple strategies.
