SCARCITY OF STARTER HOMES IS KEEPING PRICES AFLOAT AND SUSTAINING BARRIERS
Mild mortgage rate relief brought buyers off the sidelines. Existing single-family home sales hit a 5-month high in February, correlating with a slight retreat in borrowing costs. Mortgage rates have been volatile in the opening portion of 2023, climbing after the Federal Reserve voiced a more aggressive stance, then falling again after Silicon Valley Bank’s demise and the related banking sector turmoil. The average 30-year mortgage rate is nevertheless undercutting last year’s 7 percent peak, hanging in the low- to mid-6 percent range in 2023. This reduction helped drive the recent advance in home purchases. Conversely, fewer people are listing houses on the market amid economic and career uncertainty, alongside the consideration that many owners do not want to trade out their lower rate mortgages. Stronger buying amid weak motivations to sell pushed the for-sale count nationwide to a 9-month low in February. In particular, a lack of entry-level homes on the market is propping up prices and sustaining challenges for prospective fi rst-time buyers.
Predictions for a major price drop counteracted by low supply. While the median single-family home price has trended down from May 2022’s historic peak above $400,000, expectations for a substantial collapse have been off target so far. The median price of an existing house increased since the end of 2022, measuring at roughly $384,000 during February of this year. Limited options for buyers are providing price stability. High costs and still-elevated borrowing rates will continue to encourage millennial households on the margin to remain renters for longer.
Early signs emerge of improving apartment demand. After rising consistently for half a year, the average duration that an apartment unit in the U.S. sat vacant became shorter during both January and February 2023. This corresponded with an increase in the number of leads per available unit, as well as a bump in renewal conversions during the opening two months of this year. While young adult household creation is expected to remain relatively soft amid economic and infl ationary pressures, these positive indicators for the multifamily sector are promising trends.
* Through February; Historic average: Jan. 1984 - Feb. 2023 Sources: Marcus & Millichap Research Services; Capital Economics; Freddie Mac; Moody’s Analytics; Mortgage Bankers Association; National Association of Home Builders; National Association of Realtors; RealPage, Inc.; U.S. Bureau of Labor Statistics; U.S. Census Bureau; Wells Fargo