The Reecon Report by SimonTNRE.com
The latest housing market trends report was just released from Realtor.com for December to close out 2023. I break down the data in the report and give you my professional opinion of where the housing market is heading in the new year.
The month of December saw a larger-than-average number of unsold homes than the year prior, in conjunction with the ongoing growth of newly listed homes, as developers race to build homes to meet demand in an environment where supply is so limited that home prices continue to rise despite higher mortgage rates.
“December was the second month since June 2023 that home shoppers were able to see a larger number of unsold homes than a year prior… attributed to the ongoing growth in newly listed homes.”
The report also states “once mortgage rates start to decline consistently, there is a potential for a slower than expected growth in listing activities.” Even if mortgage rates decline, it will not be enough to entice current homeowners to give up their sub-3% mortgage rates, this is the “locking effect” we have been discussing so frequently.
Improved Listing Activity
Listing activity for December 2023 declined at a less-than-expected pace, outperforming the prior year, contributing to 4.9% more homes actively for sale on any given day of the month.
- The total number of homes for sale increased by 3.6% year over year, ending a 7-month streak of declines.
- Pending home sales (homes under contract but not yet sold) improved by 0.7% compared to last year.
- Newly listed homes increased by 6.0% compared to the prior year.
Know Your Market
Health of the Residential Real Estate Market
Home sellers turned out in unseasonably larger numbers for December providing a boost to the overall inventory as newly listed homes were 9.1% above the prior year’s level.
The winter season is typically slower for the Real Estate sector of the economy, given the holiday season and cold weather. However, it is important to note that sellers in the winter seasons are generally more motivated, and buyers are likely more committed to the purchase of a home.
Although the numbers bode well for December, and suggest strong demand going into 2024, inventory remains tight, and total homes actively for sale are far below pre-pandemic levels (2019 and earlier).
“The typical home spent 61 days on the market this December, which is four days shorter than the same time last year and around two weeks (16 days) less than the average December from 2017 to 2019.”
All regions in the US witnessed a decline in DOM (days on the market) leading up to the end of 2023, indicating a strong and healthy housing market with demand remaining incredibly strong.
Stable Home Prices
The median list price for homes on the market in December of 2023 remained stable, growing 1.2% compared to the prior year.
“The national median list price declined seasonally, to $410,000 from $420,000 in November, and the median list price remained relatively stable compared to the same time last year, growing by 1.2%. Listing prices have been buoyed by scarce inventory and, while new home sales have been increasing, construction activity isn’t elevated enough to fully bridge the low inventory gap.”
Home builders need to pick up the pace and start pumping out new construction builds at a fast enough clip to meet demand in order for prices to start coming down. Currently, demand remains strong enough to continue pushing home prices higher, with the cost of financing also increasing thanks to interest rates, homebuyers are forced to rethink their available budget.
As inflation and housing affordability continue to be the biggest headwinds in the Real Estate market and the economy, first-time homebuyers will be forced into lower priced areas as demand and pricing remains hot.
Overall, the state of the housing market remains strong and healthy with plenty of opportunity for growth.
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