Housing Prices Likely to Have Slow Fall in 2023

Source: Yahoo! Finance — 

The U.S. housing market is clearly slowing down. The Census Bureau’s statistics show that building starts dropped around 11% between Jan 2021 and Oct 2022 and dropped 6% in the twelve months to October.

New home sales are down over 30% from the beginning of 2021 and down 6% over the last twelve months. But new home sales comprise about a fifth of the market with around 80% of home sales coming from existing inventory. Therefore, this segment clearly signals what’s happening in the housing market.

And it’s evident that existing home sales are also down by about a third since the beginning of 2021 and down 28% over the past twelve months. The steady decline didn’t however start until Feb 2022. Therefore, we can put it down to inflation, geopolitical factors and the Fed’s mitigating actions that raise costs for buyers and prices for sellers.

The question that arises, however, is the seller response to buyers turning away. Because either of two things can happen in this case: i.e. home owners could take their properties off the market (bringing down existing inventory) and/or construction companies that have already absorbed significant cost increases could produce less (bringing down new home inventories). In both cases, if inventories drop below demand from buyers still in the market, prices would increase.