Step Inside The Market - December 2023

Let’s jump right in!

For a high-level recap, let's start out by looking at how the average 30-year fixed rate mortgage has been tracking since our last update:

Per FRED, we can see that rates peaked in late October, at over 8% and have since steadily come down over the last few weeks and are now hovering at about 7.3% on average. However, this is still an increase since the beginning of the year, when rates were at 6.5% on average! Although high rates continue to be one of the key drivers of the slow residential real estate market in 2023, it is important to note that additional Fed Rate hikes seem unlikely into Q2 2024, which should indicate rates continuing to fall or plateau over the coming months.

Let's look at another important factor, housing prices!

The average prices of home sales has continued to increase throughout the year, starting at $505,300 in January and rising to $513,400 at the end of Q3. Due to the combined pressure of increasing sale prices and high interest rates, it has stymied the market, resulting in downward trend throughout the seasonal buying season:

*Note the above figures are express in the thousands

To bring this all together, the historically low rates that we witnessed during COVID and the ever increasing housing prices has resulted in many homeowners feeling trapped in their current homes due to the “golden handcuff” effect of having 3% (or lower) interest rates.

However, as we look through year-end and early 2024, we should continue to see both new homes (new builds) and existing home prices continue to fall:

If we look at the median price of new homes (new builds) and existing homes, both have been failing since the peaks in 2022, with New Homes down 18% to $409,300 and existing homes down 6% to $396,100.

This means that new homes are now extremely competitive in pricing compared to existing homes, which may be a positive indicator that overall housing stocks and affordability will increase into the 2024 buying season! Therefore, if rates continue to lower and the housing stock increases, we could be in for a stronger, yet historically weak, real estate market next year!

And now one interesting item for the road. Over the past two decades, the median age of homebuyers has increased by 10 years, jumping from 39 to 49! This trend is extremely interesting to see, as the American Dream is usually described as a family owning a house, but due to worsening household economic conditions over the past 20 years, it could mean the continuing shattering of the “stereotypical” American Dream.

We will be back with another market update soon!