The Conference Board reported This Week in Real Estate that consumer confidence increased for the second straight month in September to its highest level since April. NAR Chief Economist, Lawrence Yun, said this week that he foresees slower price appreciation and corresponding increases in sales in 2023 with sales picking up in the second half of the year. He noted that limited housing inventory and almost non-existent distressed property sales have supported home prices. Below are a few newsworthy events from the fourth week of September that influence our business:
Pending Home Sales Dropped 2.0% in August. Pending home sales sagged for the third straight month in August, according to the National Association of Realtors. The Pending Home Sales Index (PHSI), a forward-looking indicator of home sales based on contract signings, fell 2.0% to 88.4 in August. Year-over-year, pending transactions dwindled by 24.2%. “The direction of mortgage rates – upward or downward – is the prime mover for home buying, and decade-high rates have deeply cut into contract signings,” said NAR Chief Economist Lawrence Yun. “If mortgage rates moderate and the economy continues adding jobs, then home buying should also stabilize.” “Only when inflation calms down will we see mortgage rates begin to steady,” said Yun. Yun notes that limited housing inventory and almost non-existent distressed property sales have supported home prices. Overall, he forecasts prices will rise by 9.6% in 2022. In 2023, Yun foresees slower price appreciation and corresponding increases in sales as the year progresses. “Next year, the annual median home price is expected to rise by only 1.2%,” Yun added. “Home sales will pick up in the second half of 2023 but will be down by 7.1% overall.”
What Experts Say Will Happen with Home Prices Next Year. Experts are calling for home prices to appreciate next year, although at a slower pace than the previous three years. The reason for this is simple. The dynamics of supply and demand are playing out in real estate and will continue for many years to come. Over the past couple of years, home prices have risen at an unsustainable rate, leaving many to wonder how long they would last. If you’re asking yourself: what’s ahead for the price of my home, know that experts are now answering this question and its welcome news for homeowners who may have been led by the media to believe their home would lose value. Historically, home prices have appreciated at a rate near 4%. For 2023, the average of six major forecasters is 2.5%. While one, Zelman & Associates, is calling for depreciation, the other five are calling for appreciation (4.4%, 4.1%, 4.0%, 3.1%, and 2.1%, respectively). Two things are driving home prices upward. First, the undersupply of homes on the market is an issue we continue to face in this country. We still don’t have enough homes on the market for the number of people that want to buy them. Second, millennials are moving through their peak homebuying years. Since they’re the largest demographic behind the baby boomers, demand isn’t going away any time soon.
Consumer Confidence Rises to 5-Month High in September. Consumer confidence increased for the second straight month to the highest level since April, as solid job gains, declining gas prices, and easing inflation contributed to more optimistic views of the economy. The Consumer Confidence Index, reported by the Conference Board, increased 4.4 points from 103.6 to 108.0 in September. However, spending plans were mixed. The purchasing intention to buy cars and major appliances increased, while the intention to buy homes fell due to the rising mortgage rates. Looking forward, consumer spending will continue to face headwinds from inflation and interest rate hikes.