The U.S. housing market has experienced significant changes in recent years, with mortgage interest rates reaching record lows in 2020 and 2021, and then surging to 20-year highs in the last quarter of 2022 before settling in the 6% range. This rapid rise in mortgage rates has had a notable impact on the housing market, as many buyers are struggling to afford higher monthly payments.
Despite the rise in mortgage rates, home prices are still increasing across much of the country. The median U.S. home listing was priced at $424,495 in March 2023, which is about 6% higher than it was one year earlier, according to Realtor.com. Limited supply of homes on the market together with a steady level of active buyers are propping up prices.
In March 2023, there were about 15% fewer new listings than in March 2022. This decline in new listings may be due to reluctance among sellers to let go of the ultra-low mortgage rates they secured during the pandemic and the fear that they won’t get the prices they want.
Historically affordable regions such as the Midwest and South have seen the largest rise in home prices. In some of these markets, homes are being listed well above last year’s prices. In Omaha, NE, the median home listing price in March reached $344,500, up a whopping 80% from last year. In Davenport, IA, median listing prices soared by more than 63% year-over-year to $220,000 in March 2023. In the South, cities like Jackson, TN and Fayetteville, NC have reported sharp increases in home prices.
Even so, while home prices are still increasing in many areas, the rate of growth has slowed down in general. Austin, TX, which once topped lists of hottest housing market, has seen a drop in prices of around 8%, to $550,000 in March 2023. In Bend, OR, list prices fell 6% year-over-year to $678,000 in March 2023.
The main takeaway may be that the real estate market is becoming increasingly localized and regionalized. Factors like the local economy's performance, the area's ability to attract new residents, and the builders' capacity to meet growing demand are driving the market more than ever.
