U.S. Housing Market in the Second Quarter of 2023: A Closer Look
The National Association of Realtors® (NAR) recently released its second-quarter report on the state of the U.S. housing market in 2023. The report provides a comprehensive overview of the trends, fluctuations, and conditions impacting the real estate market. In this article, we'll dive into the key findings of the report to gain insights into the evolving landscape of the housing market.
Price Gains in Metro Areas
Almost 60% of metro markets (128 out of 221) registered home price gains in the second quarter of 2023, despite fluctuating mortgage rates. However, an overall year-to-year drop of 2.4% in U.S. home prices occurred because total declines outweighed increases. Notably, 5% of these markets saw double-digit price increases, albeit down from the first quarter of the year.
Factors Behind Home Price Changes
According to NAR Chief Economist Lawrence Yun, the decrease in home sales can be attributed to higher mortgage rates and limited inventory. However, he also pointed out that affordability challenges are easing due to moderating and, in some cases, falling home prices. At the same time, the number of jobs and income levels in the U.S. are on the rise.
National Median Single-Family Home Price
Comparing the national median single-family existing-home price to a year ago, there was a decrease of 2.4%, with the median price reaching $402,600. In the second quarter of 2022, the national median price had only decreased by 0.2%. Lawrence Yun emphasized the significance of local market variations, which exist despite the minor change in the national home price. These local variations can be influenced by a variety of factors, such as regional economies and housing supply.
Regional Variations
Among the major U.S. regions, the South, which includes states like Florida, stood out with the largest share of single-family existing-home sales, accounting for 46% in the second quarter. However, there was a year-over-year price depreciation of 2.2% in this region. In contrast, prices rose by 3.2% in the Northeast and 1.4% in the Midwest. The West experienced a significant price retreat of 5.8%, with notable declines in cities like Austin (down 19.1%), San Francisco (11.3%), Salt Lake City (9.6%), and Las Vegas (7.4%).
Yun noted that price declines in some of the fastest job-creating markets are indicative of these areas adjusting to more stable fundamentals after years of rapid price increases. This adjustment is seen in the number of homes receiving multiple offers and the ongoing growth in job opportunities and wages, suggesting that sharp price increases might be a thing of the past in these regions.
Top Metro Areas with Price Increases
The NAR report highlights the top 10 metro areas with the largest year-over-year price increases, all of which recorded gains of at least 10.4%. Notably, six of these markets were in the Midwest, showcasing the region's robust performance. These metro areas include Fond du Lac, Wis. (up 25.3%); New Bern, N.C. (19.7%); Duluth, Minn.-Wis. (14.6%); Davenport-Moline-Rock Island, Iowa-Ill. (12.6%); Allentown-Bethlehem-Easton, Pa.-N.J. (11.7%); Kingsport-Bristol-Bristol, Tenn.-Va. (11.5%); Peoria, Ill. (11.5%); Green Bay, Wis. (10.9%); Trenton, N.J. (10.5%); and Cape Girardeau, Mo.-Ill. (10.4%).
Expensive Housing Markets
The NAR report also points out that seven of the top 10 most expensive housing markets in the U.S. are located in California. These markets include San Jose-Sunnyvale-Santa Clara, Calif. ($1,800,000; down 5.3%); San Francisco-Oakland-Hayward, Calif. ($1,335,000; down 11.3%); Anaheim-Santa Ana-Irvine, Calif. ($1,250,000; down 3.8%); Urban Honolulu, Hawaii ($1,060,700; down 7.4%); San Diego-Carlsbad, Calif. ($942,400; down 2.4%); Salinas, Calif. ($915,600; up 0.6%); Oxnard-Thousand Oaks-Ventura, Calif. ($904,900; down 2.7%); San Luis Obispo-Paso Robles, Calif. ($890,900; down 3.2%); Boulder, Colo. ($871,200; down 6.7%); and Naples-Immokalee-Marco Island, Fla. ($850,000; unchanged).
Home Sales Report Takeaways
The report reveals several key takeaways from the second quarter's home sales data. Approximately 41% of markets (90 out of 221) saw home price declines, which was an increase from 31% in the first quarter. Housing affordability worsened during this period due to rising home prices and mortgage rates. The monthly mortgage payment on a typical existing single-family home with a 20% down payment increased to $2,051, marking a 10% rise from the first quarter ($1,864) and an 11.6% increase from a year earlier.
Families were spending a greater portion of their income on mortgage payments, reaching 27%, up from 24.5% in the previous quarter and 25.3% a year ago. This reflects the increasing challenge of housing affordability in the current market.
For first-time buyers, the situation was even more challenging. A typical starter home valued at $342,200 with a 10% down payment loan saw its monthly mortgage payment rise to $2,012, marking a 9.9% increase from the previous quarter ($1,830) and an 11.3% increase from a year ago ($1,807). First-time buyers typically spent 40.7% of their family income on mortgage payments, up from 37.1% in the prior quarter.
Furthermore, the report highlighted that a family needed a qualifying income of at least $100,000 to afford a 10% down payment mortgage in 40.3% of markets, which was an increase from 33% in the prior quarter. On the other hand, a family needed a qualifying income of less than $50,000 to afford a home in only 6.3% of markets, which was a decrease from 10% in the previous quarter.
Understanding the Complex Real Estate Landscape of 2023
In conclusion, the NAR's second-quarter report paints a complex picture of the U.S. housing market in 2023. While some metro areas experienced significant price gains and a strong real estate market, others grappled with declines, largely influenced by factors such as mortgage rates, regional economies, and housing supply. As the housing market continues to evolve, keeping a close eye on local and national trends remains essential for both buyers and sellers
