US Home Prices Fall In ‘Unique Market’

Existing home prices in the US are falling. Or were falling. And for real this time. But with caveats.

Prices tentatively dropped on a YoY basis in February, a milestone. US home prices hadn’t fallen since 2012. One broker’s data tipped the decline+ in early March, and the NAR subsequently reported a minuscule drop for February, the first in 131 months.

On Thursday, the NAR’s latest update on existing home sales found February’s decline revised to show no change, but March’s 0.9% drop was the largest since the last stretch of declines more than a decade ago.

In March of 2022, the median existing home price was $379,300. Last month, it was $375,700.

Of course, rates are higher this year. Specifically, the 30-year fixed averaged 6.5% last month, versus 4.2% in March of 2022, so while would-be homeowners will certainly take anything they can get in terms of lower prices, a 230bps increase in financing costs negates the savings. In addition, prices actually rose in three out of four regions. The West was responsible for the “nationwide” drop.

It’s worth mentioning that just prior to the pandemic, median prices were generally in the $290,000 range. So, if you had half a million, you were getting a pretty nice home, and financing it at a pretty attractive rate. Now, in 2023, a family with $100,000 cash and good credit can still get a decent home, but it’s not going to impress anybody when the median is nearly $400,000. More importantly, it’s going to be a lot more expensive per month which, depending on the circumstances, could actually prevent families from buying the home they want, even when they have the downpayment.

As for sales, March’s 4.44 million rate for existing homes was below estimates, but not by much. Last month’s 2.4% decline came on the heels of a blockbuster jump in February, which was revised marginally lower.

You’re reminded that February’s surge snapped a 12-month streak of declines, which coincided with the Fed’s efforts to cool a market they helped stoke.

Obviously, sales were still dramatically lower measured against the same month a year ago. They fell 22% in aggregate, and nearly 30% for homes in the $1 million+ bucket.

“Home sales are trying to recover and are highly sensitive to changes in mortgage rates,” NAR Chief Economist Lawrence Yun remarked. “Yet, at the same time, multiple offers on starter homes are quite common, implying more supply is needed to fully satisfy demand. It’s a unique housing market.” That it is, Mr. Yun.

I’ve been a bit surprised (and amused) at reader interest in my own search for a new base of “operations” or, if I can’t bring myself to abandon my island exile permanently, a second base (an “outpost,” as it were). I don’t have much new to report in that regard this week.

I did discover what looked like a hidden gem nestled in a North Carolina town you’ve never heard of (I’d never heard of it, and I’ve spent a fair amount of time in the state). The seller’s agent described a “downtown” condo, which made me chuckle. As far as I could tell, there’s literally nothing there, other than maybe a gas station, a few little restaurants and an administrative building small enough to double as a pawnshop. I couldn’t even make out a barber pole anywhere.

I’m still waiting to get the backstory on the property, but a nice chef’s kitchen with very high-end appliances, sliding barn doors and a modern gas fireplace for snowy nights, made for a pretty alluring scene, even as I imagine getting stuck there in the winter might be a little too Jack Torrance-y for comfort. It was listed around half a million, which somehow seemed both very cheap and a little bit expensive simultaneously. As Yun put it, “It’s a unique market.”