The housing market for the first two months of 2023 has been marked by continued strong demand and limited inventory, resulting in rising home prices and competitive bidding wars.
According to the National Association of Realtors (NAR), existing-home sales in January 2023 decreased by 1.9% compared to December 2022, but were still 16.3% higher than in January 2022. The decrease in sales can be attributed to the limited inventory of homes for sale, which fell by 6.2% in January 2023 compared to December 2022, and was 25.5% lower than in January 2022.
Despite the decrease in sales, home prices continued to rise in January 2023. The median existing-home price for all housing types was $310,500, up 10.2% from January 2022, marking the 118th consecutive month of year-over-year price gains.
The limited inventory of homes for sale has also led to increased competition among buyers, with multiple offers becoming more common. The NAR reports that 71% of homes sold in January 2023 were on the market for less than a month.
In addition to limited inventory, low mortgage rates have continued to fuel demand for housing. According to Freddie Mac, the average 30-year fixed mortgage rate in January 2023 was 2.88%, up slightly from 2.78% in December 2022, but still historically low. The low rates have made homeownership more affordable, even as home prices have risen.
The strong demand for housing has also led to an increase in new construction. According to the Census Bureau, housing starts in January 2023 were at a seasonally adjusted annual rate of 1.67 million, up 1.7% from December 2022, and 24.5% higher than in January 2022. Building permits, an indicator of future construction, were also up 5.5% in January 2023 compared to December 2022, and 14.7% higher than in January 2022.
However, despite the increase in new construction, it may take time for the new supply to catch up with demand, as construction has been hampered by labor and material shortages. The National Association of Home Builders (NAHB) reports that builders are facing a shortage of skilled labor, as well as rising costs for materials such as lumber, which have increased more than 50% since the beginning of 2022.
Looking ahead, experts predict that the strong demand for housing will continue in 2023, driven by low mortgage rates, a strong job market, and demographic trends such as millennials entering their prime homebuying years. However, the limited inventory of homes for sale may continue to constrain sales and push prices higher.
The NAR predicts that existing-home sales will increase by 3.3% in 2023, while the median existing-home price will rise by 4.4%. The NAHB forecasts that new single-family home sales will increase by 5.5% in 2023, while the median new home price will rise by 6%.
In conclusion, the housing market for the first two months of 2023 has continued to be characterized by strong demand, limited inventory, rising prices, and increased competition among buyers. While new construction has increased, it may take time for the new supply to catch up with demand. The low mortgage rates and strong job market are expected to continue to drive demand in the coming months, but the limited inventory may continue to constrain sales and push prices higher.
