Hello! Welcome back to Flight School – Aerial View, where we take a quick look at the latest market updates.
As a reminder, we gather and summarize data from the leading analysts and economists in the real estate industry to provide you with a snapshot of what’s happening with mortgage rates, inventory, demand and pricing. Below are some key insights for the week of October 23, 2023.
Let’s begin with what’s on the top of everyone’s mind – mortgage rates. The average on a 30-year fixed continued to trend towards 8% this week as the Treasury yield surpassed 5%. Rates have been steadily climbing now for seven straight weeks, the longest consecutive increase since Spring 2022, according to Freddie Mac.
As for inventory, it grew again this week by 1.5% to 554,000 single family homes on the market. There are now just 3% fewer homes on market than this time last year, with inventory now growing faster than the same time last year. October 28th was the peak of inventory in 2022 due to mortgage rates spiking, and rates have spiked again this year which is why we have a similar pattern of inventory climbing deep into the fall.
Shifting to our third topic, demand, we saw only 55,000 homes go into contract this week, which is historically low. This tells us that potential buyers are waiting, be it for lower mortgage rates or lower home prices. Typically when demand falls, prices fall. We have the demand drop, but we don’t have the price drop. Why? It comes back to inventory. Due to the historically low inventory we’re at a supply and demand balance because there are simply no homes to choose from and that’s keeping the floor high on pricing.
Speaking of pricing, this week the median price of a single family home was $435,000. Homes are now seeing fewer offers, with 38.5% taking a price reduction, more than normal this time of year and increasing each week. Last year, the number peaked at 42%, so while there are bearish indicators for how prices will finish, they’re not actually as bearish as last year. The key figure to watch for is whether price cuts break above 42%. The other thing to watch is mortgage rates, if they fall from 8% to somewhere in the 6’s, that will spur the demand side more than the supply side, active inventory will fall, and prices will climb. If mortgage rates stay in the 8’s, or head higher, that will further drive down demand, active inventory will climb, and prices will drop.
WRAP UP
That’s it for this week, be sure to check in next week for another market snapshot! And as always, reach out now to learn even more about how Flyhomes can help you on your home buying and selling journey.
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