October Housing News & Notes

As October 2023 unfolds, the housing market is experiencing significant shifts, largely influenced by mortgage rates reaching 23-year highs.

With mortgage rates in the mid-to-upper 7% range, monthly mortgage payments are up by nearly 10% compared to last October. This rise in mortgage rates hasn't materialized in drastically falling demand -- at least, not yet.

Homeowners, anticipating a long-term scenario of high rates, are increasingly opting to sell, thus contributing to a rise in new listings. Zillow notes in its monthly housing report that new listings are now nearly level with the previous year, a notable recovery from earlier deficits.

Home Value Trends: A Mixed Picture

The housing market is also witnessing a complex pattern in home values.

Zillow’s Home Value Index indicates a year-over-year increase of 2.3%, with the index currently at $347,972.

However, this growth is uneven across the country. While home values are still rising in some major metropolitan areas like Miami and San Jose, other regions, notably Austin and New Orleans, are seeing declines.

This variability is further echoed in the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, which showed a 2.6% increase in August 2023.

The index, now at an all-time high, suggests a strengthening in home prices, with cities like Atlanta, Boston, and Miami reaching peak levels.

Inventory Dynamics: Fluctuating Supply

Another crucial dimension of the current housing landscape is the inventory of homes for sale.

Realtor.com's October report highlights a continuous growth in the inventory of homes, defying typical seasonal trends. However, this inventory is still 41.8% below the levels seen from 2017 to 2019, indicating a persisting shortage.

The number of homes for sale in the 50 largest metro areas in the U.S. decreased by 6.7% compared to last year, with significant regional variations.

For instance, Southern metros like Memphis and New Orleans witnessed considerable inventory growth, yet most Southern metros still lag behind pre-pandemic inventory levels.

Market Dynamics: Time on Market and Price Adjustments

The time homes spend on the market and the prevalence of price reductions are key indicators of market dynamics.

According to Realtor.com, the typical home spent one day less on the market this October compared to last year. In the 50 largest metropolitan areas, this reduction in time on the market is even more pronounced.

Zillow's report indicates that the share of homes sold above list price is decreasing, and more sellers are resorting to price cuts, with 25.2% of sellers reducing their list price in October.

What This Means for Buyers and Sellers

The current state of the housing market presents unique challenges and opportunities for both homebuyers and sellers.

Sellers need to remain flexible on price due to the increased expense of financing purchases. Buyers, on the other hand, might have to adjust their expectations, potentially considering smaller or less expensive homes.

The housing market in October was characterized by rising mortgage rates, mixed trends in home values, fluctuating inventory, and changing market dynamics. These factors together shape a complex and evolving landscape for buyers and sellers alike.