It’s officially summer, which means one thing in the real estate industry—we’ve moved past what is historically the busiest home buying and selling season of the year.
But to many, it feels like the spring market never even happened. At least, that’s what a new Redfin report says.
Real estate professionals all know we are in the thick of a complex housing market. But if the busiest season of the year is really over, it begs the question: what will the rest of 2023 be like?
2023’s Spring Housing Market
In a market that’s causing many real estate agents to question their career path, it’s no secret that interest rates near 7% have effectively immobilized home sellers, who are reluctant to give up their significantly lower rates. Because of this, there is not enough housing inventory to meet buyer demand, and the spring market—which typically sees a surge in activity—never fully took off.
The final weeks of the spring saw declines in both active listings and home sales. There was an 8% decrease in active listings year over year during the four weeks ending June 18, according to Redfin’s analysis of MLS data.
Source: Redfin
Along with limited inventory, pending home sales fell for the 13th consecutive month, this time decreasing 15.7% year over year. Home sales also declined by 16% from a year earlier during the same time period.
Source: Redfin
In order to see increased activity over the summer months, the housing market will need one of two things, according to Redfin Deputy Chief Economist Taylor Marr.
There are two things that would jumpstart the housing market: A big drop in mortgage rates and/or a big surge of new listings. Neither of those things happened this spring; instead, rates rose and new listings dropped to record lows. And with one or two more interest-rate hikes expected this year, mortgage rates are likely to remain elevated at least through the summer, continuing to limit both demand and supply.
What will the rest of 2023 bring?
The first week of summer did bring some growth in active inventory, with an 8,886 increase in housing inventory for the week of June 19, 2023, according to Housing Wire. While this increase is welcomed news, it’s not enough to keep up with demand—especially at more affordable price points.
As he does every week, Byron Lazine broke down last week’s housing inventory increase on the Hot Sheet, the internet’s only live daily housing show:
With homeowners likely to stay put until interest rates come down, increasing the number of new homes is essential to solving the inventory problem. This shortage goes beyond a temporary setback, as the housing market has been structurally underbuilt for over a decade, as KCM Chief Economist George Ratiu explained on a recent episode of Knowledge Brokers.
Fortunately, in May 2023, there was an increase in housing starts, providing some much-needed hope for home buyers.
But even though there wasn’t much of a spring homebuying season this year, there was a spring building season. That means there’s hope for more listings somewhat soon, with homebuilders working to fill the inventory bucket. Builders broke ground on more single-family homes in May than almost any month in nearly two decades, which could expand buyers’ options by the end of the year.
While the spring housing market may have left much to be desired, the story of the 2023 market is far from over. As the industry continues to navigate uncertain terrain, real estate professionals must be prepared to educate consumers on a case-by-case basis—and help them seize opportunities as they arise.
