Typically, the spring housing market brings a flood of new inventory with sellers wanting to take advantage of buyers wo are looking to get settled into a new home over the summer before their children head back to school. So far in 2023 the buyers are available but the sellers aren’t doing their part leading to frustration for those who are trying to navigate today’s complicated real estate market. So, what seems to be going on?
Heading into 2023 most real estate analysts were predicting a correction in the housing market due to the rapid increase in mortgage rates. Logically this makes sense as the average new 30-year mortgage rate is now 6.39% as of May 4th according to Freddie Mac, double what it was at the start of 2022. With the cost of borrowing so much higher, the price of homes should come down to compensate, but this hasn’t been case. The median existing home sale price has essentially been flat from March of 2022 to March of 2023.
The historically low mortgage rates that homeowners were able to take advantage of during the pandemic have effectively handcuffed them to their current homes. As of March 31st nearly 2/3 of primary mortgages in the US had an interest rate below 4% and almost 3/4 had a 30-year fixed mortgage. The homeowner with a growing family that would like to upgrade to a larger home, or the empty nester who would like to downsize is opting to stick it out for longer. A recent industry survey of people who would like to sell their home and buy a new in the next 12 months showed the 56% plan to wait for rates to decline. All of this is leading to unusually low inventory for the spring, and competition amongst potential buyers.
The current homebuyer is in a uniquely tough spot with increased rates, sustained high prices and lack of inventory. It would be wise to be patient and wait until this market works itself out. If you simply can’t, then you may want to consider looking into new construction where you can often receive builder incentives that may make the purchase relatively more affordable.