4/24/2023 Market Update

Home Sales Fall
With a lack of major economic news, it was a relatively quiet week. The most significant economic reports came from the housing sector and were close to the expected levels with minor impact. As a result, mortgage rates ended the week with little change.
In March, sales of existing homes fell 2% from February and were 22% lower than last year at this time. Inventory levels were a little higher than a year ago, but still stand at just a 2.6-month supply nationally, far below the 6-month supply typical in a balanced market. The median existing-home price of $375,700 again was slightly lower than a year ago and down from a record high of $413,800 in June.

The inventory of existing homes for sale is now over 40% lower than in 2019 prior to the pandemic. One big reason for the extremely low number of homes for sale is the significant rise in mortgage rates, which on average have more than doubled since the end of 2022. Surveys indicate that many potential sellers feel “locked in” to their current home because the rate on a new mortgage if they move would be much higher than the rate on the mortgage they have now.

Given the persistent shortage of available homes, there is a tremendous opportunity for builders to provide additional supply, and the latest reports suggest that they are responding. Although total housing starts posted declines in March, the weakness was entirely due to multi-family units, as single-family housing starts rose 3% from February. Similarly, single-family building permits, a leading indicator, increased 4% from the prior month. In addition, the latest survey of home builder sentiment from the NAHB rose slightly to the highest reading since September. Due to the relatively tiny number of existing homes available for sale, the chief economist of the NAHB pointed out that new homes represent over 30% of current housing inventory, far above the levels around 10% typically seen under normal market conditions.

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