Home Values Are Still Holding Strong!
Happy Friday! Brian Manning here with the weekly update. Let’s get right to it.
So… Monday, we got a lot of negative publicity about the median home sales price. I just want to talk about this because this is not home appreciation. I just want to walk through, like, what median price means, and how this has an impact on us. So, let’s say… In 2022, you had five houses sold. You had one that sold at $200K, another home at $250k, another home at $300K, another home at $350k, and another home at $400K. So, you had five homes that sold. The middle home sold at $300,000. Now… In the year of 2022, let’s say homes appreciated by 6%. So that $200,000 home moved up to being worth $212,000. That $250,000 home is now worth $265k. That $300,000 home is now worth $318,000. All right, because homes appreciate, they went up in value. And let’s just say of the homes that sold in 2022, they went up in value by 6%.
Now, here we are in 2023, and let’s just say only three of the homes sold. So, of the three homes that sold, let’s just say the three that sold were the one that sold for 212, 265, and 318. And the higher price homes didn’t sell for whatever reason. So, now, instead of having five data points, you’re down to three. So, now, your median home price, instead of being $300,000, is now $265k, because of the three homes that sold, the middle one is now your median home price. So, you get this negative publicity that median home prices have gone down.
The challenge we’re seeing in the marketplace is a lot of the higher end homes are not selling. So… When you have people thinking about buying a home and you have someone saying, well, hey, I’m having more children, my family is growing. I need to go from a condo to a house. You know, there are needs and there’s wants. And you always see in a time like this where the needs trump the wants. And what I mean by that is that people that have to move because their families are growing, job, location, et cetera, that’s in the lower price homes that are selling. But typically, the luxury home sales, the higher price homes, those are usually people that don’t need to sell, they might want to sell.
So, you’re going to see less home sales that take place and the higher price numbers. So, the median home price is going to be impacted. Again, this is not home appreciation. This is just the median home price. So, you got to be careful what you watch there in the media, because median home price coming down is not alarming. Tuesday this week, we got information on home appreciation. Let me do a share screen really quick. Let’s take a look at this.
So, home appreciation. So, first thing we got is Case-Shiller. This is for the month of April. On a month-over month-basis, home appreciation was up 5/10th of a percent. That’s a really strong number. On a year-over-year basis, home appreciation was down 3/10th of a percent. Not surprised to see a small decline here. The reason why I say that is because if you look at a year-over-year number, in 2022, homes appreciated 9% from January to June of 2022. So, now, we have some really big numbers that we’re competing against. So, when homes appreciate that fast, and now you see slowing of appreciation, you’re going to see some negative numbers here, but it’s not to be scared. If you look at the peak of 2022, case-Shiller says home prices are only down 1.8%. That’s from the absolute peak. That is definitely not a housing collapse. 2023 pace for home… Case-Shiller, excuse me, thinks that homes will be on pace to appreciate at 3%. So, Case-Shiller looks at all purchase transactions that take place. Cash buyers, primary residences, second home, investment properties, everything.
Then, we get FHFA in the same day. So, FHFA gives us information on closed sales through the month of April, but this is only for transactions that have a conventional loan. So, this rules out jumbo purchases, cash buyers, everything there. So, FHFA says across the country, all homes that were purchased with a conventional mortgage, month-over-month basis went up 7/10th of a percent, and year-over-year are of 3.1%. So that’s really good. Again, from the peak in June, we’re still up 1.6% for homes that were purchased across the country with a conventional loan. And FHFA thinks that we’re going to see home appreciation with what they track up 7% for 2023. So, still really strong.
In fact, if we look at home appreciation across the board, everything is turning higher. I’ve said this before, I truly believe the lowing our marketplace really everywhere was in Q4, and we’ve seen a rebound since then. So… Everywhere we look, Case-Shiller, January, end of Q4 and into Q1, numbers were down. Now, they’re down. FHFA, always up across the board. CoreLogic, really solid data points for appreciation. Again, January, down 2/10th of a percent, February, March, April, positive appreciation. Black Knight, positive appreciation. Zillow, same thing, down 2/10th of a percent in January. For the rest of the year, positive appreciation. So, appreciation across the country is holding strong because inventory is low.
Another thing we got for this week on Tuesday was new home sales. So… So, this is looking at signed contracts on an annual pace. And so, we had 763,000 new home sales for the month of May. On a month-over-month basis, this was up 12.2%. On a year-over-year basis, this was up 20%. So, really good to see. What you have to watch out for in the media here though is available inventory for new construction homes is at 428,000. The challenge with available inventory is that a lot of these homes haven’t even started yet. So… If you look at the monthly sales pace… So, if we have 763,000 annualized sales, that means new home sales anticipate 763,000 sales in the year of 2023. On a monthly basis, that’s 64,000 sales a month. Of the homes that are completed and ready to be bought and moved in new construction properties, there’s only 69,000 homes available.
So, right now, there’s a 1.1-month supply of new home sales, which is really strong, and inventory is definitely still super low. Thursday this week, we got GDP. So, GDP was the Q1 final number. Expectation was that GDP would be down 1.4%. It came back stronger than expected, up 2%. The US economy is definitely showing resiliency, and we’re still seeing strength there. We also got pending home sales. This is for the month of May. They were down 2.7%. Yes, on a year-over-year basis, pending home sales are down 22%. Inventory is really at an all-time low. Demand is still really high. If you look at the report, it says… there’s little bit over three offers per listing, so you’re still seeing a lot of demand. And 31% of homes that were listed sold above asking price.
Also Realtor.com came out and said, hey, we’re going to support this. And we know that pending home sales are down 22%. Inventory as listed on Realtor.com is down 25% year-over-year. So, we’re still seeing, you know, low inventory. There are still buyers that are out there, and it’s still really supporting a very strong housing market. Today, we get PCE. That’s the personal consumption expenditure. This is the Federal Reserve’s favorite gauge for looking at inflation. This is for the month of May. The core rate went from 4.7% to 4.6%. Remember, this is at a peak at 5.4%. So, we’re still slowly starting to see inflation come down. I don’t think the Federal Reserve is very happy with this. I think the Federal Reserve wants quicker movement. They want this core rate to be at 2%.
The Federal Reserve, you know, personally, I think should be patient. They should look at the rate hikes that they did, see how that translates to an impact in the economy, and wait and see. You have a couple of people, Fed voting members, that are willing to wait, but it almost seems like the Federal Reserve is not going to stop until they put us into a deep recession or really harm the housing market. Excuse me, really harm the job market, because that’s what’s going to really slow inflation to get them down to that target 2%. Federal Reserve always is on boom and bust cycles. You look back a couple of years ago, they kept rates historically low for too ago, now, they they’re probably going to swing the pen on the other side and raise rates too high. It’s just the market we’re dealing with. It’s what we’re in. I’m around all weekend. If you have any questions, let me know.
I know that Tuesday is the Fourth, but it kind of feels like a holiday weekend, but I’ll be available and working. If you want to get pre-approved or you have any buyers that need to get pre-approved, give me a call. I’d love to help you. If you want to learn how we’re closing purchase transactions in 10 days, just reach out.
Happy Friday. Happy 4th of July weekend. Have a great day.
-Brian
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