Posted on 14 March 2023
Here is your housing market briefing for March 2023.
As usual, let’s first look at the national macroeconomic indicators before turning to local statistics.
Starting with home price indices, the Case-Shiller Index shows a sixth consecutive decline in home prices, since its peak in June 2022.
Zillow, which hasn’t shown any decline until this month, has finally caught up and updated its national index. It’s now showing that prices have been coming down for the past 5 months.
Redfin is sticking to its consistent message that home prices are down, again, although year-on-year they are still higher.
Home prices are declining, in part, because people are worried about the economy. The Conference Board’s Leading Economic Indicators says a recession is still coming.
On the other hand, the Chicago Fed’s National Activity Index is showing an increase in economic activity in the latest reported month.
This positive news is negative news for the Fed Chair Jerome Powell, who told the lawmakers on Tuesday that
…the latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated. If a totality of the data were to indicate that faster tightening is warranted, we’d be prepared to increase the pace of rate hikes. Restoring price stability will likely require we’ll maintain a restrictive stance of monetary policy for some time.
So, this means that the interest rates will remain elevated for some time. The 30-year average fixed mortgage rate is now at the highest level since Nov 2022.
The higher interest rates aren’t helping the mortgage application numbers. According to the Mortgage Bankers Association, mortgage application trends were in the negative zone 3 times in the past 4 weeks.
That’s national numbers. Let’s now zoom in to the local level, because the housing market is hyper-local by nature.
Again, as I’ve said before, while my data come from Palm Beach County, FL, and while my indicator levels are only locally applicable, the indicator trends, meaning changes in the levels, are generalizable to many other local housing markets in the country.
So, what’s happening with prices at the local level? There aren’t any strong trends. The message is definitely mixed, with price trends showing differences by home types.
Days on the market is further down. This may be surprising. And even though, as I’ve mentioned previously, DOM is naturally biased down for the latest months initially, the decline is too sharp to be explained by this bias alone.
So, what’s going on? One possibility is that the supply of housing is still very, very tight. The number of new listings this February is at the lowest level in years!
And that’s in part because a lot of homeowners locked in historically low mortgage rates, and are now reluctant to sell because they’d be facing much higher rates to move in to a new house.
Percent of homes selling above list price came almost all the way down to the normal range last month, but ticked up a little in February.
Still, it’s way down from the head-spinning pandemic highs, so this point goes to Buyers!
However! The percent of listings that had to lower their prices hit the multi-year low in February.
It seems like, after the spike in the second half of 2022, the sellers realized they could no longer “test” the market the way they did during the pandemic, and now listings are hitting the market with more realistic numbers, meaning there is less of a need to lower the original list price.
At 58% in February, cash transactions are as high as ever.
And do you know that the average home price in Palm Beach County was $799,000. Yes, in this case, the average is more appropriate than the median. So, 58% of all purchases were in cash. There was one purchase for $9 mil, in cash! There is one for $18.9M, in cash. And another for $22M, in cash, just this February.
Come back next month for the April 2023 market update. See you again soon!