Where are home prices in America’s 400 largest housing markets headed in 2023? These 5 charts give us some clues – Fortune
While it’s pretty clear that pressurized housing affordability has triggered some deflation in the U.S. housing market, industry insiders remain divided on what the ongoing home price correction will look like in 2023. The reason? Demand and supply are sending mixed signals.
On the housing demand front, things remain slumped with mortgage purchase applications (down 38% year-over-year) currently just below their lowest point during the 2000s housing crash. On one hand, if financial conditions ease and mortgage rates fall in 2023, homebuyer demand would increase. On the other hand, the pandemic’s housing demand boom could’ve had a pull-forward effect that results in a slower than expected post-pandemic housing market.
On the housing supply front, things remain fairly tight nationally. While spiked mortgage rates corresponded with a huge decline in demand, it hasn’t caused sellers to rush for the exits. In fact, new listings on Realtor.com are down 17.25% on a year-over-year basis. Many buyers who would normally be looking to move up to a bigger house have postponed the switch because they don’t want to give up their fixed 2% or 3% mortgage rates they have for their current house.
So do buyers (for whom low demand is a potential tailwind) or sellers (for whom tight supply is a potential tailwind) have the upper hand? One of the best indications might be the direction of inventory—and its speed of change. At first glance, it might be easy to assume that inventory (i.e. active listings for sale) is simply a measurement of supply, however, it’s also a measurement of demand. If homebuyers pull back, and homes sit on the market longer, that can increase inventory levels (currently up 46.8% year-over-year) even if new listings (currently down 17.3% year-over-year) decline.
Let’s take a closer look at inventory data in the nation’s 400 largest markets.
Shortly after mortgage rates spiked this spring, the overheated U.S. housing market cooled. That swift pullback in buyer demand finally gave inventory breathing room to rise.
While national inventory levels on Realtor.com are up 46.8% year-over-year, the picture varies significantly by market. Cities like Austin and Phoenix have seen their respective inventory levels soar 160.7% and 176%. Meanwhile, markets like Chicago and New York City remain essentially unchanged.
When it comes to inventory, the speed of change matters. A sudden inventory spike often marks a housing market that has moved into a full-blown correction. Of course, we now know that’s exactly what happened this summer in markets like Austin and Phoenix, where home values are already down 10.4% and 8.1% from their respective 2022 peaks.
Why are inventory levels spiking in some markets and flat in …….