2023 Home Prices

In October, mortgage rates were around 8%, but that didn’t deter home sellers. Data compiled by CoreLogic shows home prices that month were 4.7% higher than in October 2022.

But all real estate is local. Price changes varied from market to market across the country.

To provide a visual element to these price changes, the Federal Reserve Bank of New York put the data into a map of the U.S. Homes in counties shaded in blue gained value while those in brown lost value. Counties in white were not measured.

The map shows that red-hot Miami-Dade County cooled down a bit in October, with home prices rising 8.8%, down from recent double-digit gains. Maricopa County, Arizona – another active market during the pandemic, saw home prices rise but only by 2.2%.

Markets with double-digit gains were few are far between. Home prices in Chippewa Falls, Wisc., surged 22.2%. The price of a home in Becker County, Minn., rose 15.5% and 16.1% in Siskiyou County, Calif., the northernmost country in the state.

Price declines were more numerous in the West and Southwest. Home prices in Travis County, home of Austin, were down over 6%. Home prices in Okanogan County, Wash., were 5.3% lower than a year ago.

While the October 2023 map doesn’t show the housing market “crash” that many people predicted, the October 2022 map shows just how much prices have changed in 12 months.

In October 2022, home prices in Miami-Dade County increased 22.2% over the previous year and prices in Albany County, Wyo., a popular ski area, had gained 20.2%.

After rising to nearly 8% in October, mortgage rates are falling. Over the last two weeks, the 30-year fixed-rate mortgage rate has fallen to 7.03%. Since the October high, rates have fallen 69 basis points, the fastest rate since the 2008 housing market crash.

“The 30-year fixed-rate mortgage averaged near 7% last week, down from nearly 7.80 percent just six weeks ago,” said Sam Khater, Freddie Mac’s chief economist. “When rates began to rapidly drop, purchase applications rebounded initially, but this improvement in demand diminished in the last week. Although these lower rates remain a welcome relief, it is clear they will have to further drop to more consistently reinvigorate demand.”

If so, how far do rates have to drop before affordability improves and buyers return to the market? Desiree Avila, a board-certified Realtor with CRR Fort Lauderdale, says buyers appear to be recovering from the shock of high interest rates and may be ready to buy if rates keep falling.

“I think in the range of the low 7’s, high 6’s can spur spending,”Avila told ConsumerAffairs. “Current rates have not deterred buyers completely, many are finding a way to make it work.”

For example, some buyers have resigned themselves to taking out a high-interest mortgage with a plan to refinance the loan when rates fall. Some buyers are buying down points for a time to reduce the up-front rate. 

There’s still pent-up demand

Avila says there continues to be pent-up demand. If rates continue to fall it could “unleash” a flurry home home-buying. 

“Over the next six months, I am hopeful we will dip into the 6’s,” Avila said. “This would mean reversing a year of interest rate hikes, so I don’t think it will be in the low 6’s, but the high 6’s.

A drop in home prices might also help buyers get back into the market but so far this year, there is little evidence of that. In spite of 8% mortgage rates, the National Association of Realtors (NAR) reports the median home price in October was $391,800, a 3.4% increase over October 2022.

Total housing inventory at the end of October was 1.15 million units, up 1.8% from September but down 5.7% from one year ago. 

Home sales appear to have hit a brick wall. The combination of near-record home prices and rising mortgage rates has drastically reduced home affordability.

But since early in 2023, home prices just about everywhere have continued to go up. Now, a new report from real estate brokerage company Redfin suggests home prices are beginning to come back to earth in more markets.

The report found that nearly 7% of homes for sale posted a price drop during the four weeks ending October 29, on average, the highest portion on record. In the background, mortgage rates hit their highest level in 23 years last week, cutting even more into what buyers can afford.

Rates have retreated a bit this week but are still elevated, considering the median home price is now over $350,000. But it may take some time for meaningful price reductions to appear in most markets.

'Bizarre' housing market

In spite of slowing sales, low inventory is propping up prices. The total number of homes for sale is down 10% year over year; new listings are up 1% from a year ago – just the second increase since July 2022 – but that’s partly due to new listings falling quickly at this time last year. 

Redfin analysts – as well as many real estate agents – describe the housing market as “bizarre.” Sellers are dropping prices while the average home price continues to rise. Redfin agents describe a mismatch between sellers’ high expectations and the reality of buyers’ budgets, saying it’s more important than ever for sellers to price fairly from the start to attract buyers and sell quickly. 

“Some sellers are pricing too high because they have FOMO (fear of missing out) after their neighbor’s house sold well over asking price two years ago,” said Seattle Redfin Premier agent Patrick Beringer. “While low inventory is driving some competition and relatively affordable homes in popular neighborhoods are still selling fast, they’re getting two or three offers as opposed to 20 offers at the height of the market. With mortgage rates in the 7.5% to 8% range, buyers simply don’t have the budget they would have had two years ago or even one year ago.”

Court verdict could be another hurdle

But if last month's federal court verdict against the National Association of Realtor (NAR) stands, home buyers could face another hurdle. A jury in Kansas City, Mo., found NAR and two major brokers liable for keeping sales commissions high and awarded damages of $1.8 billion.

In a normal transaction, the buyer’s agent and the seller’s agent split a 6% sales commission. The plaintiffs in the case said they shouldn’t have to pay the buyer’s agent and therefore the commission should be a lot less.

If the case stands, homebuyers will have to pay the real estate agent who represents them, adding to the cost of buying a home. But NAR President Tracy Kasper says the case is “not close to being final.”

“We will appeal the liability finding because we stand by the fact that NAR rules serve the best interests of consumers, support market-driven pricing and advance business competition,” Kasper said. “We remain optimistic we will ultimately prevail.”

In 2022 ConsumerAffairs published a study that found 63% of respondents were hoping for a housing market “crash,” thinking a plunge in prices would make it easier for them to buy a home.

In early 2023, home prices on a national average basis began to go down. The median home price declined slightly for five straight months. Then in July, prices started rising again.

If there was a housing “crash,” economists say that might have been it. Shorter than predicted and not much of a crash at all.

But how can people afford homes priced near record highs when mortgage rates are now well over 7%, more than double what they were in late 2021? The truth is, many can’t. But that doesn’t seem to matter.

Those high mortgage rates are preventing current homeowners from selling. They don’t want to give up their 3% mortgage rate for one north of 7%.

There’s still a housing shortage

Because they aren’t selling, the housing shortage – which began more than a decade ago – is getting worse. There are enough buyers who can afford today’s high prices and lofty mortgage rates so that when a home comes on the market, there is still competition for it, which often drives up the price.

If you look at home sales you might think we are in the midst of a housing market crash. The National Association of Realtors (NAR) reports sales of existing homes fell 2.2% in July from the month before. Compared to July 2022, sales plunged 16.6%.

If sales fell by that amount and there were lots of homes on the market then it probably would be a housing market “crash” and prices would fall accordingly. But sales fell because there simply weren’t enough homes on the market and instead of pushing prices lower, may actually have contributed to the price increase.

Foreclosures, which were largely responsible for the last housing market crash, are almost non-existent these days. NAR reports distressed sales – foreclosures and short sales – represented 1% of sales in July, virtually unchanged from the previous month and the previous year.

'The supply just isn't there'

“Even in a market where demand has been hammered by higher rates, the supply just isn’t there,” Diane Swonk, chief economist at KPMG, told the Wall Street Journal. “Short of a flood in supply, it’s hard to bring these prices down.”

So now buyers are faced with the double whammy of higher home prices and high mortgage rates. NAR reports the median existing home price for all housing types in July was $406,700, an increase of 1.9% from July 2022, when the median price was $399,000. Prices rose in the Northeast, Midwest and South but were unchanged in the West, which has some of the most expensive housing markets in the country.

Finally, there may be some good news for people who want to buy a home. Even though the national median home price has started going up again, there are markets where the list prices are falling.

Austin, Phoenix and San Jose have seen home prices fall since the beginning of the year, but those markets were already among the most expensive in the nation. But now price declines are beginning to show up in cities whose median home price was already below the national average.

“Generally, there are two things that can drive an increase in price reductions,” said Realtor.com Chief Economist Danielle Hale. “One is if you have more homes on the market. Two is if there is a mismatch between what sellers are expecting and what buyers are willing and able to afford.”

In this case, it’s the latter. Inventory levels remain near historic lows but with mortgage rates now well above 7%, there is a limit to what buyers are willing and able to pay, especially in job markets where the prevailing salary is significantly below those in more expensive cities.

According to Realtor.com, 29 of the 150 largest metropolitan areas saw a year-over-year increase in the number of homes where the list price had gone down. Across the country, only about 15.5% of all homes listed on Realtor.com underwent a price cut that month. That was down from 19.1% the previous July.

Cities with the most price cuts in July

The data show cities with the most price declines tend to be in the South and Midwest, where the number of homes for sale has been growing along with prices. With a recent study showing remote workers would be willing to move in order to find an affordable home, these markets may be worth a look:

1. Huntsville, Ala.

2. Lafayette, La.

3. McAllen. Texas

4. Jackson, Miss.

5. Augusta, Ga.

6. Memphis, Tenn.

7. Fort Collins, Colo.

8. Cape Coral, Fla.

9. Greenville, S.C.

10. Fort Wayne, Ind.

Huntsville had, by far the largest median home price – $407,000 – so it also experienced the most price cuts. The number of price cuts increased by 69% over July 2022.

But even McAllen, Texas, with a median home price of $289,000, experienced a 50% increase in price cuts year-over-year.

Realtors say sellers who set a realistic price from the start usually don’t have to cut the price to sell. In Fort Wayne competition remains fierce for homes priced below $250,000, with these properties often receiving multiple offers.

For the last half of 2022 and the first half of 2023, YouTube pundits professing knowledge of the housing market predicted a crash in home prices. It didn’t happen.

In fact, for the last few months, home prices have actually started going up again, defying mortgage rates that are twice what they were just two years ago. In June, the average new mortgage payment hit a record-high of $2,656.

S&P CoreLogic Case-Shiller’s home price index is a lagging indicator of home prices but its latest report shows U.S. home prices rose for a fourth consecutive month in May. But it noted that regional price differences are getting wider. Some markets may be losing ground but others are making gains.

On a national, seasonally-adjusted basis, home prices rose 0.7% from April’s home prices. Compared to May 2022, however, prices were 0.5% lower.

‘Broad-based rally’

"The ongoing recovery in home prices is broadly based,” said Craig J. Lazzara, managing director at S&P Dow Jones Indices. “Before seasonal adjustment, prices rose in all 20 cities in May as they had also done in March and April. Seasonally adjusted data showed rising prices in 19 cities in May, repeating April's performance.

The outlier is the Phoenix housing market, which saw huge price gains from 2020 to 2022. All of this is happening as mortgage rates continue to flirt with 7%, compared to just under 3% in late 2021.

So the question should be asked – is now a good time to buy a home? If you ask a real estate agent, you can bet the answer will be “yes.” But what about asking someone a bit more objective?

Reasons to buy now

In an interview with investment website The Street.com last month, personal finance guru Dave Ramsey said he thought now is a good time to buy, under certain circumstances. Ramsey said buyers need to have little debt and have an emergency fund available.

Because of high interest rates, Ramsey said there is less competition to get the home you want. He also notes there continues to be a housing shortage.

In a recent interview with ConsumerAffairs, Christopher Stout, principal at StoutCap, a real estate investment firm, said that lack of inventory has made it hard for buyers.

“The market has been generally frozen now, for almost a year,” he told us. “From what we see, values have changed so rapidly that there is an emotional reaction to not want to believe what the ‘new normal’ is. More inventory will hit the market and buyers will determine value. From there, values will climb over time.”

Another bullish indicator are the national home builders. As they reported second-quarter earnings their stocks soared because profits were up and so were margins.

In spite of predictions they would be unable to sell expensive homes in a high interest rate environment, they seem to be selling everything they build.

If the spring housing market was a bust for would-be homebuyers, the summer isn’t shaping up any better.

People who purchased a home in the last few weeks may be saddled with an average mortgage payment that has never been higher, according to real estate broker Redfin. Its report shows high home prices and an uptick in mortgage rates pushed the typical homebuyer’s monthly payment up to a record $2,656. 

Daily average mortgage rates are starting to moderate, thanks to cooling inflation, but Redfin says house payments are likely to remain elevated because even slightly lower rates may escalate competition for the few homes on the market and push up prices for the foreseeable future.

In a normal market, a decline in home sales would probably lead to some housing bargains. That isn’t happening because there is still strong demand for nearly every home that is on the market. Low inventory levels are keeping home prices from falling back to earth.

Redfin’s Homebuyer Demand Index, a measure of early-stage demand that tracks requests for tours and other buying services from Redfin agents, is up 2% from a year ago. Pending home sales are down 15% year over year, but new listings are down 25%, with homeowners who have a low mortgage rate reluctant to move.

The total number of homes for sale is down 16%, the biggest drop in a year and a half. For this time of year, there is an unusual decline in new listings.

Adjusting to higher mortgage rates

“Even though buyers are trepidatious about high mortgage rates, we’re seeing bidding wars in several pockets of the market because there are so few options and even fewer good options,” said Redfin Premier agent Jordan Hammond, of Raleigh, N.C. “Condos, townhouses and new construction homes are selling quickly, partly because they don’t require much work and people can’t afford to fix up a home when they have such high monthly mortgage payments.”

After over a year of high mortgage rates, Hammond says buyers have gotten over the shock and are adjusting to cutting expenses in order to pay their mortgage. He said they are also searching for smaller homes, and “thinking outside the box to reduce their monthly payments, doing things like rate buydowns or large down payments.”

The daily average 30-year fixed mortgage rate was 6.87% on July 19, down from a half-year high of 7.22% two weeks earlier. For the week ending July 13, the average 30-year fixed mortgage rate was 6.96%, the highest level since November.

In late 2022, when home prices leveled off in the face of rising mortgage rates, many prospective homebuyers hoped for a major housing market correction. Many “experts” on YouTube have been predicting a market crash for months.

So far, it hasn’t happened. In fact, one industry report says prices in many areas of the country are still going up, even while sales decline.

The S&P CoreLogic Case-Shiller Indices, a thorough but lagging indicator of U.S. home prices, shows home prices recovered in March in all 20 major metro markets it monitors. Prices were up over February but down compared to March 2022. But there were plenty of exceptions.

Miami, Tampa, and Charlotte reported the highest year-over-year gains among the 20 cities in March. Miami led the way once again with a 7.7% year-over-year price gain, followed by Tampa in second with a 4.8% increase, and Charlotte replacing Atlanta in third with a 4.7% increase. 

Prices are down in the most expensive markets

The cities where prices have fallen tend to be markets where prices have increased the most over the last couple of years. There are 19 of 20 cities reporting lower prices in the year ending March 2023 compared to the year ending February 2023, but even Chicago showed a small increase in March.

So why are prices going up again when the economy is slowing and mortgage rates remain above 6%? Housing experts say the answer is simple – it’s supply and demand.

Yes, it’s more expensive now to buy a home but there appear to be more people willing and able to buy than there are available homes. Greg McClure, a Realtor with Realty ONE Group in Sacramento, says that’s the case in his market.

“Sales are trending up, home prices are trending up but inventory will remain an issue through the rest of the year,” McClure recently told us.

Buyers face more competition

The lack of inventory means there is more competition among buyers. Homes don’t remain on the market for very long and sellers sometimes get multiple bids, even in this high interest rate environment.

The National Association of Realtors (NAR) reports sales of existing homes dropped 3.4% in April but the median price declined only slightly. In many markets, it went up.

"Roughly half of the country is experiencing price gains," said Lawrence Yun, NAR’s chief economist. "Even in markets with lower prices, primarily the expensive West region, multiple-offer situations have returned in the spring buying season following the calmer winter market. Distressed and forced property sales are virtually nonexistent."

Housing experts say this situation exists largely because the pace of building new homes has slowed considerably for more than a decade. New single-family home construction peaked in 2006 and hasn’t approached that level over the last 17 years.

There’s good news for would-be home buyers. The median home price in February fell 0.2% from February 2022, the first decline in home prices in 11 years. Home prices had continued rising since October, even after a surge in mortgage rates brought sales to a standstill.

But here’s why buyers shouldn’t get too excited. Existing home sales surged in February, rising 14.5%, according to the National Association of Realtors (NAR). Buyers reentered the market when mortgage rates began to decline. A sustained increase in demand for homes could push prices back to near their record highs.

Another factor that could be working against buyers during the spring housing season is a lack of supply of homes to choose from. 

The total housing inventory registered at the end of February was 980,000 units, identical to January and up 15.3% from one year ago. Unsold inventory sits at a 2.6-month supply at the current sales pace, down 10.3% from January but up from 1.7 months in February 2022.

"Inventory levels are still at historic lows," said NAR Chief economist Lawrence Yun. "Consequently, multiple offers are returning on a good number of properties."

Multiple offers are good for sellers but not for buyers. When buyers have to compete for a property, they are more likely to pay full price or more and overlook flaws they would otherwise request the seller to address.

Doesn't tell the entire story

The decrease in the median home prices, while small, doesn’t tell the entire real estate story. Yun says every market is unique but that the recent decline in mortgage rates makes some U.S. housing markets a little more competitive.

"Conscious of changing mortgage rates, home buyers are taking advantage of any rate declines," Yun said. "Moreover, we're seeing stronger sales gains in areas where home prices are decreasing and the local economies are adding jobs."

Those markets would include San Francisco, San Diego, and Phoenix – among others. But even with price declines, these markets remain among the most expensive in the U.S. The median home price in the West last month was $541,100, down 5.6% from February 2022.

The median home price in the Midwest rose last month by 5% but that price – $261,200 – is the lowest in the nation.

Photo (c) Richard Jones/Science Photo Library - Getty Images

Hopes for a better spring housing market dimmed this week as mortgage interest rates, which had moderated since the first of the year, went up again last week.

The Mortgage Bankers Association (MBA) reports the rise in interest rates was so abrupt that it sent mortgage applications into a tailspin. New applications plunged 13.3% from the previous week.

 Joel Kan, MBA’s vice president and deputy chief economist, attributes the drop to rising rates, which make homes less affordable.

“Mortgage rates increased across all loan types last week, with the 30-year fixed rate jumping 23 basis points to 6.62% – the highest rate since November 2022,” Kan said. “The jump led to the purchase applications index decreasing 18% to its lowest level since 1995.” 

The nearly quarter-point rise in just seven days can be traced to rising rates on U.S. Treasury bonds. The rate on the Treasury’s 10-year bond, currently at 3.9%, has been rising amid inflation concerns. 

Bad timing

That rate has a direct impact on interest rates for mortgage loans. Kan says the increase comes at a bad time for the housing market.

“This time of the year is typically when purchase activity ramps up, but over the past two weeks, rates have increased significantly as financial markets digest data on inflation cooling at a slower pace than expected,” Kan said. “The increase in mortgage rates has put many homebuyers back on the sidelines once again, especially first-time homebuyers who are most sensitive to affordability challenges and the impact of higher rates.”

Homebuyers face another challenge in addition to rising interest rates. Home prices are still going up.

In fact, Zillow this week reported that heading into the spring season, home values are up 6% from a year ago and are 39% higher than in 2020. The big reason for that is the lack of available homes for sale. 

Zillow reports the number of homes for sale is the second-lowest on record — meaning stiff competition for well-priced homes.

In spite of a doubling of mortgage rates over the last 12 months, pricing millions of people out of the housing market, home prices have yet to crater. In fact, an industry report shows they’re still going up.

In its report on the fourth quarter of 2022, the National Association of Realtors (NAR) found average U.S. home values went up 4% compared to the fourth quarter of 2021 when mortgage rates were around 3%.

While that’s a smaller annual increase than the 8.6% rise in the third quarter, the median home value of $378,700 continues to put homeownership out of reach for many people. Home values have yet to fall except in a handful of housing markets.

Unfortunately, unless you are very affluent, that might not help much. According to the NAR report, San Francisco suffered the largest decline in median home values in the last quarter, with values falling 6.1%. However, even with the decline the median home value in that market is $1.23 million.

San Jose and Anaheim, Calif., have also seen home prices decline but the median home sale price is still north of $1 million.

Where prices are rising

Elsewhere, prices are still rising – especially in Florida. NAR reports the median home price in Sarasota is up 19.5% year-over-year. Prices are up 17.2% in Naples, 15.2% in Punta Gorda, and 14.5% in Daytona Beach.

But if fewer people are buying houses, how can prices keep going up? It’s a matter of supply and demand, according to NAR chief economist Lawrence Yun.

“Even with a projected reduction in home sales this year, prices are expected to remain stable in the vast majority of the markets due to extremely limited supply,” Yun said. “Moreover, there are signs that buyers are returning as mortgage rates decline, even with inventory levels near historic lows.”

Why most prices aren't falling

In short, new home construction has lagged behind demand for years. Now, with mortgage rates over 6%, current homeowners with low mortgage rates are less likely to plant a “for sale” sign in their front yard.

If there is any good news for would-be buyers it is this: even with double-digit price increases some attractive housing markets are still affordable. According to Redfin, January’s median home value in Myrtle Beach, S.C., was $270,500, well below the national median home price.

Meanwhile, buyers willing to wait a few months may be rewarded. As we recently reported,  Aaron Wagner, CEO of Development at Axia Partners and founder and managing partner at Wags Capital, believes home prices will begin to reset in the second quarter of this year, with some dramatic price reductions before the end of 2023.

A decline in the average mortgage rate last week brought a little hope to homebuyers but purchasing a home in this environment is still challenging. 

In its monthly report, the National Association of Realtors (NAR) said sales of existing homes fell for the eleventh straight month. Sales plunged 1.5% from November and were 34% lower than in December 2021.

“December was another difficult month for buyers, who continue to face limited inventory and high mortgage rates,” said NAR Chief Economist Lawrence Yun. “However, expect sales to pick up again soon since mortgage rates have markedly declined after peaking late last year.”

Last week the average 30-year fixed-rate mortgage was sharply lower but was 6.23% - still more than double than a year ago. 

Declining inventory is another challenge. Not only are there fewer choices for buyers, but it also is keeping prices from going down. In fact, NAR reports the median existing-home price for all housing types in December was $366,900, an increase of 2.3% from December 2021, with home prices rising in all areas of the country. It marks 130 consecutive months of year-over-year increases, the longest-running streak on record.

But there are still deals

That said, all real estate is local and varies from market to market. Where the market is softer – with more properties than buyers – Eddie Martini, the strategic real estate investment advisor at HouseCashin, says there are deals to be had.

“I have experienced buyers being able to close at below asking price, with closing credits as well as sellers buying down mortgage rates,” Martini recently told ConsumerAffairs.

According to NAR, total U.S. housing inventory at the end of December was 970,000 units. That’s a 13.4% drop from the previous month.

Despite the challenging conditions, first-time buyers were more active in the market in December than in November. NAR says first-time buyers accounted for 31% of sales, compared to 28% in November.