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The Current State of the Housing Market

In recent times, prospective homebuyers have been met with a frustrating reality: property prices continue to rise unabated. Even the highest mortgage rates in nearly 23 years have failed to halt this upward trend. According to the latest S&P CoreLogic Case-Shiller home price index, prices increased once again in July, with 19 out of 20 markets measured showing month-over-month gains. The National Association of Realtors (NAR) also reports that median home prices in August were up about 4 percent year-over-year, marking the highest median prices ever recorded for those months.

The hope for a “housing recession” to curb these soaring prices has all but faded. The U.S. housing market had shown signs of slowing down in late 2022, raising hopes of a correction. However, a surprising twist occurred, and home values started climbing once more.

Lawrence Yun, NAR’s chief economist, stated, “The housing recession is essentially over,” emphasizing that median sale prices of existing homes are currently near record highs. August 2023’s median of $407,100 comes close to the all-time high of $413,800, a milestone achieved only five times since NAR began keeping records.

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This surge in prices has persisted even in the face of soaring mortgage rates, which have reached their highest levels in over two decades. The primary culprit? A severe shortage of available housing. NAR’s August data revealed a meager 3.3-month supply.

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Skylar Olsen, chief economist at Zillow, points to this supply-and-demand imbalance, forecasting that home prices will continue to rise into 2024. This is undoubtedly good news for sellers, but it poses a significant challenge for first-time buyers striving to enter the market. Olsen asserts, “We’re not in that space where things are suddenly going to be more affordable.”

Realtor.com’s September 2023 Housing Market Trends Report echoes this sentiment. High mortgage rates have led to a 12.4 percent increase in the monthly cost of financing a typical home (after a 20 percent down payment) compared to last year. This translates to an additional $256 in monthly payments compared to September of the previous year.

Given these dynamics, housing experts unanimously agree that any market correction is likely to be modest. No one anticipates price drops on the scale witnessed during the Great Recession.

Key Housing Market Statistics:

  • Average mortgage interest rate on a 30-year loan: 7.8 percent (as of Oct. 4, 2023) – the highest since November 2000.
  • Home sales fell by 0.7 percent from July 2023 to August 2023, with a 15.3 percent decline since August of the previous year.
  • The nationwide median sale price in August 2023: $407,100, a record high for August.
  • August saw a 3.3-month supply of housing inventory, well below the 5 to 6 months needed for a balanced market.
  • Realtor.com’s September Housing Market Trends Report revealed a 8.9 percent year-over-year decline in the number of homes for sale in the country’s 50 largest metro areas.
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The big question on everyone’s mind: Is the housing market on the brink of a crash? Drawing parallels to the pre-2008 bubble, experts indicate that the situation differs significantly. This time around, factors like strict lending standards, low foreclosure activity, and a more cautious approach by builders all contribute to a more stable market.

In conclusion

while home prices continue to push the boundaries of affordability, the consensus among experts is that this boom is unlikely to end in a bust. With a solid foundation and a cautious approach, the housing market appears poised for stability in the face of current challenges.

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