Housing Market Trends March 2023 | Residential Snapshot

Last Updated on March 1, 2023 by Luke Feldbrugge

This month we take a look at the housing market trends for March 2023 and the numbers that swirl around one of the most important sectors in our economy – real estate. Our market updates have, necessarily, focused a lot on mortgage rates, and this month is no different. Federal Reserve Chairman Jerome Powell raised the interest rates on federal funds yet again at the beginning of February, jacking them up another 0.25%. That can have a ripple effect throughout the real estate world by raising the interest rates on mortgages, which doesn’t help anyone – buyers, sellers, real estate agents, or lenders.

It’s an important distinction to point out that this interest rate increase was to Federal Funds and not the 10-Year Treasury Note. Higher mortgage rates are more directly linked to the 10-Year, however they all tend to travel in the same direction. When one goes up, they all tend to go up. In this case mortgage rates bumped up a bit to the average rate of 6.09%.

Where are Mortgage Rates Going?

Many indicators seem to point to the fact that mortgage rates are stable, even with the recent bump, and are poised to go down. We hope. We have reported at length about the interest rate hikes this past year. It was the fastest rate jump in…ever. It spooked a lot of people, especially first-time buyers who had to dramatically downscale their expectations for the kind of house they would be able to afford. Some buyers dropped out of the U.S. housing market altogether. Sellers also had to re-evaluate their pricing and some dropped their prices to respond to the slowing demand. Some sellers also dropped out of the market long term.

For real estate agents and mortgage lenders, this has not been a happy time either.

The good news is the peak of the mortgage interest rates happened last November (we think), and rates dropped almost a full point since then– even with the recent increase. Everyone is currently staring at the Fed and wondering what it will do next.

In the spirit of optimism, let’s assume the higher interest rates will stabilize because, face it, they can’t repeat last year’s wild ride. The prospect that rates will stabilize has its own benefits, especially after the last few years. Stable rates mean you can plan. Stable rates can help you budget for the future. Stable rates mean you can do productive work like getting pre-approved.

mortgage rates trending downward november 2022 Feb 02 2023 Freddie Mac 30 Year Fixed Rate

Of course, some are wondering if we will see low interest rates again. Last year we reported that experts were predicting interest rates dropping down to 5% by the middle of 2023. No one is saying that anymore. We are, however, close to that number. About the best we can say is that we are all still hopeful.

Housing  Market Trends March: Inventory and New Listings

There’s no good way to say this, but the active inventory of houses, i.e. listings, is down since December. If you are a buyer, that’s not great news.

new listings now below previous years last 7 januarys since 2017 source realtor.com

Last year, we were seeing some encouraging numbers around inventory, and that made sense. The high interest rates meant fewer people in the housing market, so demand was down and it gave the inventory levels time to recover from the buying frenzy during the pandemic. But it didn’t last. In terms of new construction, contractors are still spooked by the higher rate for mortgages, so the number of homes they are starting is still low.

Even though buyers are “bewaring” right now, there is still strong demand. With fewer homes, it doesn’t take an advanced degree in economics to figure out what will happen with housing prices in the next year. That is, unless something changes.

House Prices

Low supply and high demand equals higher prices for homes. Of course, you’re not hearing that in the news and in the expert predictions. Last month, for example, Goldman Sachs predicted a 6.1% depreciation in the real estate industry. They revised that two weeks later, predicting a 2.6% depreciation.

Many expert organizations like Case Schiller, Black Knight and CoreLogic have stated that the depreciation of home values peaked last August.

have home values hit bottom 2022 MOM percent change in home values for four different indices sources case shiller FHFA black knight corelogic

No one seems to be ready to say when, or if, housing price increases will begin again, but at least, for now, it looks like we have already hit the bottom.

Real Estate Market Headlines: Terrify or Clarify?

One of the reasons we do this market update every month is to help you separate the wheat from the chaff, i.e. the numbers versus the headlines. Headlines are designed to get your attention and to get you to the article to read more. In the competition for your attention, a lot of the real estate headlines are essentially clickbait. They exaggerate in order to get you to click through to the article. In the race to write the most over-the-top headlines, the truth often gets left behind.

That’s when you need to turn to the numbers and see what they say.

“What are the facts? Again and again and again – what are the facts? Shun wishful thinking, ignore divine revelation, forget what “the stars foretell,” avoid opinion, care not what the neighbors think, never mind the unguessable “verdict of history” – what are the facts, and to how many decimal places? You pilot always into an unknown future; facts are your single clue. Get the facts!”

― Robert Heinlein

When you are reading the real estate headlines, it’s a good idea to separate what you’re reading into one of two columns: Clarify or Terrify. Some reports are, thankfully, dedicated to clarifying the housing market. Others, unfortunately, are designed to terrify you.

Terrifying Headline #1: A Housing Crash is Coming

Here’s a great example of reporting on how people feel about the future. A recent survey from a financial website proclaimed that “67% of Americans say a housing market crash is imminent in the next three years.” That’s two out of every three people.

Of course, we all remember the last housing crash. It’s fresh in our minds, and it was very bad. We fear that a housing bubble will happen again, even if there is no indication of that. Fears make it easy to ignore the truth, which is:

  • Forbearance is when your mortgage lender allows you to pause or reduce your mortgage payments for a limited time while you build back your finances. This kept a lot of people in their houses, especially during Covid.
  • Higher Equity helps people sell their homes instead of going through foreclosure.
  • Banks and Lenders are being much more careful about the mortgages they issue.

The real estate market is not poised for a crash, no matter what people believe.

Terrifying Headline #2: Foreclosures are Up

People who are looking for evidence that a real estate crash is coming point to the recent increases in foreclosure. Here, we have some facts to back this conclusion up–foreclosures are up 115%.

Now let’s add a little context.

us foreclosure activity doubles annually but still below pre pandemic levels bar graph us properties with foreclosure filings 2005 2022 source ATTOM

As you can see, 2021 had the lowest foreclosure rates in 16 years. Any increase is going to look like a big deal. Last year we did increase foreclosures over the previous year, but from a historical context, the foreclosure rate is still exceedingly low. When you are looking for clarity, you need both the facts and some context.

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We publish our Housing Market Trends every month. If this is helpful, check back with us at the beginning of every month.

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