Put yourself back into the August mindset. It’s hot. Children are going back to school (or parents are desperate for them to be headed that way). There’s shopping for pencils and notebooks, meeting the teachers, wrapping up vacations, starting fall sports, and bookmarking soup recipes.
In short: Not many people were buying houses. This is borne out by the data that the National Association of Realtors (NAR) announced today, showing a minimal decrease of 0.07% in home sales from July and a much bigger decrease of 15.3% from last August. Of course, it’s not just the back-to-school distractions that are driving the slump. It’s market forces, primarily inventory and mortgage rates.
For context, in January we were looking at an almost 37% decrease year over year, so at least we’re not there. The August 2023 data story is one of waiting, holding steady, limping along, feeling exhausted, and looking forward to enjoying our soup. Let’s just get through 2023, OK? Then I think we’ll all feel a lot better.
What Does NAR’s Lawrence Yun Say?
“Home sales have been stable for several months, neither rising nor falling in any meaningful way. Mortgage rate changes will have a big impact over the short run, while job gains will have a steady, positive impact over the long run. The South had a lighter decline in sales from a year ago due to greater regional job growth since coming out of the pandemic lockdown. Home prices continue to march higher despite lower home sales. Supply needs to essentially double to moderate home price gains.”
August 2023 Data: Is the Real Estate Housing Market Crashing?
It’s not crashing. It’s not great, sure. But the housing market is tired, not hurtling or freefalling toward disaster. A decrease of less than a percentage point from July shows that things are pretty much holding steady and that people are waiting.
They’re waiting for lower rates, waiting for more options, or waiting for the bank to get all their cash together so that they can use that to buy a property. (All-cash purchases were 27% of total home sales, an increase of 1% from July.) Or they’re trying to decide whether they want a second home at the beach or in the mountains. (Second-home sales accounted for 16% of the total in August—unchanged from last month.)
It was a tough summer for real estate agents, and it might not be a rosy fall. But the outlook over the next six months is promising. There is hope that mortgage rates will rest at a more reasonable 6% by early spring (they’re at 7.18% this week). And developers and contractors, the unsung heroes of the 2023 housing market, are rushing to finish new homes, increasing inventory.
Regionally it was a bit boring, really: no change in the Northeast, the tiniest shift upward for the Midwest, and a 1.1% decrease in the South. The West, which had such a good July in comparison to their regional counterparts, sagged by 2.6%. Home prices were up everywhere.
End of Summer 2023 Housing Trends
It was a hot summer in terms of home prices. Prices have increased dramatically: 13.5% from the start of the year, and by more than 31% (or more than $100,000) over the past three years. Guys, a 13.5% increase from this January. Hats off to you, homesellers: Enjoy all that equity! Agents, relish in that commission!
Median Price & Home Sales
Prices increased everywhere. The West wins the battle of smallest increase in home price year over year (1%), but it has the highest median price, at $609,300.
- Northeast: No change in home sales from July, but they are down 22.6% year over year. The median home price, up 5.8% from last year, is $465,700.
- Midwest: The only region with a gain in home sales was only up 1% and down 16.4% from last year. Median prices were up to $305,300, which is a 6.8% increase from last year.
- South: Home sales were down 1.1% from July and 12.4% from last year, and the median home price was $366,100, up 3.2% from this time last year. The South made up 45% of total sales.
- West: The median home price out west rose to $609,300, only up 1% from August 2022. Home sales dipped slightly, by 2.6%, 15.7% from last year.
Nationwide, the median price increased about 1% from July, but by 3.9% from August 2022.
Interestingly, Zillow made the unprecedented move of adjusting their home price prediction downward. In an announcement earlier this week, Zillow altered its previous projection of home prices increasing 6.5% nationally by August 2024 to a significantly lower 4.9%. Its economists think inventory will remain tight, prices will increase, and home sales will continue to be sluggish into the first half of the year.
Housing Inventory in the Real Estate Market
Inventory is down almost a percentage point from July, leaving us with 1.1 million units, or a 3.3-month supply. For context, August 2022 offered us 1.28 million units.
Existing houses for sale are practically non-existent. There are so few out there, mostly because homeowners are waiting for more inventory or lower rates before they move.
New houses, on the other hand: Take a bow. While we’ve all been wringing our hands over low inventory, the real estate developers, contractors, electricians, plumbers, tilers, sheet-rockers (is that even a word?) painters, landscapers, architects, designers, urban planners, and zoning board members have all been hard at work. During the 2008 crisis and then COVID, new builds took hit after hit, but now they’re the shining stars of our inventory story.
Take a look at this graph from Yun’s presentation at last month’s NAR Leadership Summit:
Yun says inventory needs to essentially double to allow home prices to normalize? Alrighty, says the homebuilding industry. Of course, builders are impacted by the same high interest rates as everyone else, which makes borrowing expensive, if not impossible. But there is improvement.
In another hopeful sign, Zillow reported a 4% increase between July and August in the number of new listings on its platform. While still well below new-for-sale listing numbers in previous years, this is the first time Zillow has recorded this kind of late-summer boom.
Hope is on the horizon.
131 Real Estate Terms & Definitions Your Clients Expect You to Know in 2023
What to Share With Your Clients About the Real Estate Market
This is a lot of numbers and a lot of percentages, and it really all tells the story that your clients already know. It’s tough out there. Also it’s hot. Have I mentioned that?
What Sellers Want (or Need?) to Hear
Sellers, you’re sitting pretty. Home prices have increased year-over-year, month-over-month, and pretty dramatically even since the beginning of 2023. You can command a hefty price for your home. However, the days-on-market indicator is lagging slightly, with properties sitting on the market for about 20 days, the same as July. It was 16 days in August of 2022. If you want to sell your home for top dollar, go for it. If you want to sell it quickly, price it accordingly.
How to Anticipate & Overcome Emotional Seller Objections
What Buyers Want—and Desperately Need—to Hear
OK buyers, we hear you. (Listening is really important here, agent friends. It’s easy to get frustrated, but your clients need you and your empathy.) It is going to get better. June, July, and August were all very similar: record heat, low inventory, high prices, dropping home sales. But fall is coming, and then winter, but then spring! We’re really excited for spring. If you can wait it out, there’s good news coming. If you can’t wait it out, buy now and refinance. New houses are getting finished every day, and we’re excited for you to have more choices.
Does the Market Hate Everyone or Just My First-time Homebuyers?
Looking Ahead: Predicting the Fall 2023 Real Estate Housing Market
My prediction is that the fall real estate market will be more of the same. It will continue to limp along without any major swings or dives. We will all continue to wait and watch.
The Fed didn’t raise rates this week, but they keep warning us like the watchful parents they are: “We don’t love these inflation numbers, OK? They’re better, but not great.” Another hike might happen before the end of the year. The experts believe that they’re trying to ward off a massive mortgage loan application boom if rates drop significantly, which would have an impact on their inflation battle.
But hopefully, these steady inflation-stomping policies will work and the Fed will be satisfied. We’re looking forward to finding more affordable rates, more affordable housing—actually just more housing in general. Bring it on, mid-2024!
And in Other News…
What else are we talking about while at The Close watercooler? (Or in the #watercooler Slack channel?)
Leadership in Turmoil
It’s been a few weeks now since the New York Times published its exposé and NAR members were in equal parts shocked at the news or shocked at how long it took for the accusations to see the light of day. Kenny Parcell, former president of NAR and the subject of numerous sexual harassment allegations, has since resigned, leaving Tracy Kasper to lead NAR and its 1.5 million members.
The drama hasn’t ended there, though. New York and Florida Compass agent Jason Haber founded the NAR Accountability Project, organized petitions, and even picketed, arguing that it wasn’t just Parcell responsible for, in his words, “a toxic culture … that allowed sexual harassment to flourish.” Monday of this week was designated a Day of Action, including a protest outside of NAR’s Chicago headquarters in advance of the board of directors meeting.
It remains to be seen how big this movement will become, but we’re watching it closely and know that the hundreds of thousands of Realtors deserve representation with the highest integrity.
Are We Sounding the Alarm Yet?
There are two major class-action antitrust lawsuits marching through the courts, with one, Sitzer/Burnett v. NAR, starting in just a few weeks in Kansas City, Missouri. The plaintiffs are arguing that the way Realtor commissions are structured (that properties need to be listed on the MLS and sellers agree to a commission—usually 6%—in advance) limits competitiveness and drives up home prices.
NAR’s stance, one that I imagine most of us share, is that “the practice of the listing broker paying the buyer broker’s compensation saves sellers time and money by having so many buyer brokers participating in that local marketplace and, thus, creating a larger pool of buyers for sellers. For buyers, these marketplaces save them the burden of extra costs at closing, enable them to receive professional representation, and make homeownership possible for more people.”
I imagine members are reading their NAR communications about the cases as they get ready for trial. But what’s interesting is that, with a few exceptions, no one is really talking about how things might change if these two cases are decided in favor of the plaintiffs. NAR and co-defendant brokerages could be on the hook for billions of dollars. Even more concerning, it could challenge the entire way we do business. Forever.
NAR isn’t the only plaintiff in these cases. HomeServices of America, RE/MAX, Keller Williams Realty, and Anywhere Real Estate are included as well. Anywhere, the parent company of Century 21, Coldwell Banker, and Better Homes and Gardens brokerages, has already raised its hand and volunteered to settle for a reported $83.5 million. RE/MAX has offered to settle for $55 million. Both settlements must be approved by the judges adjudicating the cases.
I’d say get your popcorn and pull up a chair as the first of these cases starts October 16, but maybe a shot of tequila is more appropriate. We’re not sounding the alarm yet, but we’re watching this all very, very carefully.
Favorite New Listing: When Richard Burton Met Liz Taylor…
…he was living in this house. And now, for a cool $9.8 million, you could live here too—imagine who you might meet! This light-filled 1860’s semi-detached mansion on a charming, leafy avenue in London’s Hampstead Village has seven bedrooms and a view of St. Paul’s Cathedral. Its cool, modern aesthetic thoughtfully blends with the historic marble fireplaces, elegant, curved staircase, and oversized French doors.
Michael Sheen, fellow actor and Welshman, was behind the movement to award the home its periwinkle-hued blue National Heritage plaque commemorating Richard Burton’s ownership. “It has always been an honor for me to be associated with the wizard of wild Welsh magic that was Richard Burton,” he told the BBC.
While this was Burton’s home before he and Taylor set off on their glittering, jewel-filled, all-consuming love affair, it was where he lived during his skyrocket to fame. I would like to move in, pour a stiff scotch, and practice my Welsh brogue. Michael Sheen can come over too.
Cheers! 🥂
Bringing It All Together
The August numbers are no real surprise, and honestly, everyone is a bit tired. It feels like we’re slogging through. As agents, we’re still getting deals done, but we’re working longer and harder. Clients need us now more than ever, and even though everyone feels like they’re waiting—for more options, for better rates, for cooler weather—we’re here to keep the hope and the real estate dreams alive.
