Betting on future equity, home buyers pay more for homes than ever before

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Published Date 9/25/2023

The theory — no, law — of supply and demand is alive and well these days. The National Association of Realtors’ chief economist, Lawrence Yun puts it this way: “Housing supply needs to essentially double to moderate home price gains.” Low housing supply continues to push up the price of a home, while home buyers are showing they are willing to pay more. Realtor Magazine’s Melissa Pittman Tracy reports the median existing-home price for all housing types in August reached $407,100 nationwide, a nearly 4% increase compared to a year earlier, marking the third consecutive month for median sales prices to surpass $400,000. And this is happening everywhere — not in just large urban areas and their popular suburbs.

Inventory remained sparse — by the end of August, down about 14% compared to last year’s levels, which were already historically low, according to NAR’s report. “Unsold inventory is at a 3.3-month supply at the current sales pace; economists often say a five- to six-month pace reflects a more balanced market,” says Tracey.

Those precious few homes that are on the market tend to sell quickly, as 72% of homes sold in August were on the market for less than a month. Properties last month typically remain on the market for a short 20 days.

Still, home sales are softening due to the limited supply. NAR reported that total existing-home sales—which reflect completed transactions for single-family homes, townhomes, condos and co-ops—dropped slightly by 0.7% in August compared to July. Sales are down 15.3% compared to last year’s brisk pace.

Yun explains, “Home sales have been stable for several months, neither rising nor falling in any meaningful way. Mortgage rate changes will have a big impact over the short run, while job gains will have a steady, positive impact over the long run. The South had a lighter decline in sales from a year ago due to greater regional job growth since coming out of the pandemic lockdown.”

With higher mortgage rates not moderating quite yet, all-cash sales have been rising. NAR’s report shows that all-cash sales accounted for 27% of transactions in August, up from 24% a year earlier. Individual investors and second-home buyers tend to make up the biggest bulk of cash sales, having purchased 16% of homes in August.

Tracey offers a closer look existing-home sales across the country in August, according to NAR’s latest report:

Northeast: Sales reached an annual rate of 480,000, unchanged from July but down 22.6% compared to a year earlier. Median price: $465,700, up 5.8% from one year ago.

Midwest: Existing-home sales rose by 1% compared to the previous month, reaching an annual rate of 970,000. Sales are down 16.4% from the prior year. Median price: $305,300, up 6.8% from August 2022.

South: Sales fell 1.1% compared to July, reaching an annual rate of 1.84 million. Sales fell 12.4% from one year ago. Median price: $366,100, up 3.2% from a year earlier.

West: Sales dropped 2.6% compared to the previous month, reaching an annual rate of 750,000. Sales are down 15.7% from the prior year. Median price: $609,300, up 1% from August 2022.

Few things are more precious than home sweet home, however, so you can bet that when all this begins to normalize, it will be front-page news.

RealtorMag, TBWS

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