April 2023 Housing Market Update

[Alex Fenske]

Hi everyone, here is the housing market update I publish for clients each months. As always, there are some interesting surprises! This is data for the Chicagoland metro area sourced from Midwest Real Estate Data LLC.

Housing Affordability - up slightly
- The NAR nationwide housing affordability index increased a few points into January, with the Midwest region remaining the most affordable in the nation.

Supply – down significantly
- New listings down 29% compared to last March, the fewest new March listings on record.
- Homes for sale reached another new all-time record low, 19% below last March and 10% below the prior record set this February. Homes for sale always goes up from February to March; this is the first time we’ve ever seen it dip at this time of year.

Demand – down significantly… or is it?
- Compared to last March, pending contracts are down 20% and closed sales are down 23%, matching demand levels from approximately 10 years ago.
- Much demand remains pent-up due to persistent low inventory. If 2,000 more homes came on the market today, most would immediately go under contract and pendings would surge. So how much is demand down, really?

Supply/Demand Relationship – unchanged, seller’s market
- While demand has dropped, supply is at all-time lows which more than offsets it.
- Seasonally adjusted housing supply has remained unchanged at 1.7-1.8 months since January 2022.
- Seasonally adjusted median days to contract have remained unchanged at 9 days for nearly 2 years.

Prices – stable to slightly down
- Monthly home prices were down 2.1% compared to last March, marking the fifth consecutive month that prices were lower than the same month a year ago. Expect this to turn around soon.
- Seasonally adjusted prices have been flat for 8 consecutive months.

Mortgage rates - volatile and weird
- Today’s (4/4/23) 30yr fixed averages 6.39%, down a half-point from a month ago and right around the average of the past 6 months.
- Inexplicably, the 5/1 ARM is currently priced higher than 30yr fixed (6.6%), and the 15yr fixed is priced right alongside government-backed 30yr loans (FHA/VA) around 5.9%.
- Inflation is down from 7-8% to 5% but still way above the 2% target. The Fed's next meeting on May 2 might bring no change in rates or a .25 increase. They’re feeling good about nipping the banking collapses in the bud, preventing that scare from spreading.

What to do?
- Sellers: The balance of power still lies with the seller, but pricing is flat. Price to active competition, not just closed sales which are helpful but do not provide the real-time info necessary during times of fluctuation.
- Buyers: Shop mortgage products at all times, and know that you’re competing over fewer listings than there have ever been.