Even with interest rates above 6%
Contrary to many recent headlines, the housing market remains active and dynamic, according to new data from MarketNsight. Despite a perceptible decrease in demand, the industry research leader reports that home sales continue at a robust 80% of last year's pace, even in the face of interest rates exceeding 6%.
“Increases in the market share of new homes continue to impress. New home market share went positive year over year beginning in June 2022 — precisely when rates crossed the Sensitivity Threshold,” MarketNsight Principal and Chief Analyst John Hunt said. “Over the rest of 2022 and into 2023, many of the subdivisions in development came online, offering desperately needed inventory. With resale inventory remaining sharply depressed, new market share has grown dramatically, especially in the first quarter of this year.”
Thirty-Year Fixed mortgage rates rose from 6.39% in the third week of April to 6.43% for the last week of April. The pop in pending sales was short-lived and probably a residual effect of the lower rates in April’s first and second weeks. For the last week of April, pending sales were down 21% year to year and down 23% against the industry’s benchmark year of 2019.
The overall trend, however, remains positive since pending sales bottomed in the middle of November 2022. Year to date, pending sales are down 20% from 2022 and down 15% from 2019.
Supply and Demand
Home inventory continued to fall during most of April 2023 and was 7% below March 2023. The last week of April may have signaled a late seasonal shift, as it was the first weekly increase since inventory peaked in 2022. Hunt comments, “We will see if this seasonal trend continues into May and June.”
April 2023 inventory was up 54% over April 2022. For some perspective, inventory in April 2023 was still 50% below the same month in 2020.
The months of supply at the end of April 2023 was 1.6, and Atlanta’s annualized housing deficit remains at 62,000 units.
What About Price?
“Average prices have risen month over month since January, as they always do. In fact, April is 12% higher than January, but this really tells us nothing, as this price trend happens every year,” said Hunt. “The bigger story would be if they did not increase from January to April. This is why we look at home prices year over year for the real trend indications.”
Prices for the entire month of April 2023 were down 3% over the same month in 2022. Since the first week of January 2023, prices have fluctuated between slightly positive or slightly negative year to year. For the year to date, prices are flat versus the same period in 2022.
Again, for perspective, April 2023 prices were still up 14% over April 2021, 42% over April 2020, and 48% over April 2019.
New Construction Market Share
The revised March numbers show new home market share was up 96% over March of 2022. New market share was up 68% in April from a year ago. With Resale inventory remaining sharply depressed, new market share has grown dramatically. Hunt states, “We see this trend continuing as long as mortgage rates remain above the Sensitivity Threshold of 5.25%.”
June 2023 versus June 2022
MarketNsight data shows that the second week of June 2022 was an inflection point. That week, rates went above the Sensitivity Threshold of 5.25%, and pending sales began their precipitous fall. “Pending sales have not been positive year to year since,” comments Hunt. “That is 42 weeks so far that have been down compared to the previous year that was in positive territory.”
“Beginning in the second week of June 2023, that will all change,” states Hunt. “At that point, we will compare current pending sales against the previous year that had already gone negative. Are we up? Are we down? Compared to what? For this reason, it will be more important than ever to continue to compare against our last “normal” year – 2019. To say that nothing has been “normal” since 2019 is a gross understatement.”
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