Real's Q1 Market Report
By Steve Curran
By Steve Curran
Real's Q1 2023 Market Report
Hi Everyone,
I hope that your spring is off to a great start and that you are handling the Mariners 2-4 start more maturely than I am "Mom, the postgame show is still on and Dad won't stop crying"
After multiple consecutive years of disruption due to the Pandemic, traditional spring real estate rhythms are back in place After 6-9 months of sitting on the sidelines, homebuyers are back out not only looking at homes, but making offers again This is despite stubbornly high mortgage rates, remaining firmly planted in the 650% range As 2022 wound to a close, buyers sitting and waiting were convinced that 2023 was going to give them plenty of high quality options to choose from with limited buyer competition, plus expectations of an additional 10% off sale in the first quarter of 2023 This additional 10% off was in addition to the 10% that our market had already corrected since the overheated spring market of 2022 ran out of steam
A funny thing happened on the way to a Buyer's market......Seller's decided to strike back. Like a pick-up basketball game at the park when someone doesn't like a call, they decided to take their ball and literally go home! "Why would I sell for 1012% off my peak price and give up my 3% mortgage rate only to replace my rate with a 65% rate?" Real estate market bears who were well on their way to crowning this 2008-2009 20 overlooked one major piece of seller behavior: today's homeowners don't have to sell!
As we have discussed in this space before, today's homeowners sit on the largest amount of home equity in history AND tens of millions of homeowners refinanced into all-time record low mortgage rates For many homeowners, their mortgage payment is less than what they could rent a like-kind home for Unless life circumstances are calling for someone to move, sellers are defiantly deciding to sit this one out. This has led to puzzled buyers who were armed with media reports of real estate carnage, only to find out the reality was different from the reports they were clicking on
Let me paint the picture the best way I know how: through sports analogies and charts.
Nationwide, the total number of available homes for sale sits above the record low years of 2021 and 2022 (first half of the year). Current available inventory levels are impacted by homes that came on during the 3rd and 4th quarter of 2022 but did not sell when the market all but shut down Of note, current inventory trends appear to be heading for inventory levels to fall below 2022 levels come summer Headlines currently reporting inventory increases will shift to reporting inventory shortages again It is also remarkable how far inventory levels have fallen below 2017-2019 levels
Redfin does a fantastic job reporting real time real estate statistics As you can see, the current rate at which brand new listings are hitting the market is at the lowest rate in the modern era (at least since 2000) Sellers are on strike, refusing to give up their record low mortgage rate. Buyers expecting an increase in motivated sellers need to study this chart
Before Homeowners get too cocky (like Mariner fans this season....), I recommend looking at this chart which is very powerful. Homebuyer Housing Payments, which factor in home prices and current mortgage rates, sit at an all-time high. The economy remains resilient despite higher rates and multiple rounds of layoffs in the tech sector Incomes are rising, but inflation remains stubbornly high, eating into the income gains There is a limit at which the housing market can perform well when buyers are under this much financial stress
While the auto market is a completely different market than the real estate market, it is helpful to track as a gauge on the health of the consumer Just as the chart above illustrates with record high housing payments, a record number of car buyers are now paying at least $1,000 per month for their car
As always, like the weather, all markets are local The Western Region was home to many of the COVID boom ("Zoom") towns that outperformed the national market in recent years Expensive tech hubs have seen sharper price corrections since April of 2022 Yes, this includes Seattle The Eastern Region of the United States is still holding up relatively well considering current interest rate levels Multiple markets in Florida continue to defy gravity and are still appreciating at an annual rate of 10+%.
The majority of major housing markets have inventory levels sharply below (roughly half as many homes for sale) 2019 levels. One major outlier is Austin, a city that many market pundits now refer to as a West Coast town due to the impact of the tech sector. Inventory levels in Austin have rebounded all the way back to match 2017-2019 levels
The good news is, better weather is right around the corner and the Mariners will start to hit (like last night!) as the temperature rises! It appears that our local inventory levels will remain low as we head towards the second half of the year. Barring a significant decrease in mortgage rates (which would also increase demand) or a sharp rise in layoffs across multiple economic sectors, it is hard to envision thousands of additional local homeowners deciding that they want to sell Sellers will remain on strike, let's hope the M's offense doesn't follow suit!
Wishing all of those who celebrate Easter and Passover a wonderful Holiday surrounded by friends, family, food, and laughter
All the best, Steve
Curran
