Is the Housing Market About To Hit Rock Backside? This is What That Means, and Why We Could Be Right here for a Whereas
Today’s housing market has been in some deep doldrums by many standards, but the latest real estate statistics suggest something more serious might be ahead—that the market might be careening toward some sort of rock bottom.
“Taken as a whole, this week’s data lines up with other indicators that are pointing to a potential bottom in housing market activity at a fairly low level,” notes Realtor.com® Chief Economist Danielle Hale in her most recent analysis.
The only upside we can think of is that there’s typically nowhere to go from there but up. So, does that mean the worst days of real estate will soon be over? Not quite, since the big four harbingers of housing—home prices, inventory, days on the market, and mortgage rates—show few signs of a rebound yet.
“They don’t yet offer a strong indication of how long the market will bounce along the bottom,” Hale explains.
In other words, we might be floundering in this strange new netherworld for a while.
Yet this does not mean it’s all hopelessness and despair down here. We’ll explore what this all means for both homebuyers and home sellers in our column “How’s the Housing Market This Week?”
Rising mortgage rates’ harmful toll on the housing market
The depths of winter actually saw some signals that homebuyers were feeling optimistic. The National Association of Home Builders reported recently that more people were out touring new construction with an eye to buy—for the second month in a row. Also, a measure of pending home contract signings jumped in January. This suggests that sales will be higher in coming months, since buyers and sellers sign a contract and then close on the deal several weeks later.
But with mortgage rates surging higher, that burst of enthusiasm might be short-lived.
According to Freddie Mac, interest rates on a 30-year fixed-rate mortgage averaged 6.65% in the week ending March 2, marking the fourth straight week of heading up. And that’s heavily weighing down homebuyers who are desperately fighting to keep their head above water, financially speaking.
Home prices aren’t exactly cooperating, either. The yearly gains are moderating, which is an economist’s way of saying that they’re not rising as fast as they were, say, last fall. But they’re still rising—up 7.2% for the week ending Feb. 25 compared with that same week a year earlier.
In February, the median price of homes for sale was $415,000. Compared with February 2022, it costs $630 more per month to pay for the typical home, which might be simply too much for some buyers to swallow.
Why home sellers have given up
Every week for the past nine months, fewer homeowners have listed their properties for sale than in the same period a year ago, and the final week of February was no exception.
For the week ending Feb. 25, new listings were 16% lower than in 2022, meaning there’s less “fresh potential” for buyers, in the words of Hale.
“Fresh” might be the keyword here. If you look at all listings and not just the newbies entering the market, there are actually more homes for sale in the market right now than a year ago—67% more, to be exact. But many of these properties have been on the market for much longer—by 19 days on average in the most recent weekly tally. The pace of sales has been slowing, in fact, for 30 straight weeks. This means buyers have already seen most of these listings and decided to pass.
Yet despite this seeming glut of stale listings, it’s also important to remember that there are still only half as many homes for sale overall as there were before the COVID-19 pandemic.
Another big-picture eye-opener? The housing market might be slowing, but it’s still faster than it was pre-pandemic.
“Using time on market as a guide, today’s housing market is halfway between its most frenetic period one year ago and what was typical before the pandemic-era frenzy,” Hale explains.
In other words, our whole frame of reference for what is considered fast, slow, surplus, or shortage in housing has changed.
This shift in perspective might help “explain why both buyers and sellers are feeling lukewarm on this spring homebuying and selling season,” Hale says.
So when will this dark period in housing end?
“Mortgage rates will likely play a strong role in determining whether the market slows further or picks up speed,” Hale predicts.