NAR Deputy Chief Economist Jessica Lautz breaks down the state of the housing market after a report that existing home rales rose 14.5% in February 2023.
Video Transcript
DAVE BRIGGS: Some good news out of the housing sector. Today, existing home sales rising 14.5% in February. That's according to the National Association of Realtors. That's the largest monthly percentage increase since July of 2020. Joining us now is Jessica Lautz, National Association of Realtors deputy chief economist and vice president of research. Nice to see you. Do you believe this is a blip or the beginning of a pattern? And where is it most pronounced? Much like Tip O'Neill said about politics, all real estate is local.
JESSICA LAUTZ: Yeah, indeed. All real estate is local. And we certainly are seeing home buyers back. They are excited about the spring market. They've gotten used to slightly lower rates than what we have seen, that peak of 7%. I have to say, the most pronounced is in the west region, where perhaps buyers actually had a little negotiating power. And they were taking advantage of that.
SEANA SMITH: Jessica, where do you think we'll see the 30-year rate trend here? Do you think we're going to stay within that 6% to 7% range? Will we potentially get back above 7%?
JESSICA LAUTZ: I hope not. I do hope that we stay in that 6% range. That is our forecast, and maybe even dipping lower than that, into the 5% range towards the end of the year. I have to say that buyers have gotten used to it. They understand that 3% is not going to happen anytime soon. And so they understand that they're going to have to pay more for the mortgage.
All of that said, if we compare today's market versus last year's market, we know that last spring was insane. There was a lot of buyers coming into the market, really bidding up home prices and getting pretty frantic, waiving a lot of contingencies, trying to get into the home buying market. So right now, in a little more balanced market, it's certainly healthier for home buyers coming in.
DAVE BRIGGS: And it was really just a bit of a really quick downturn for rates that presumably caused the numbers we just saw. Do you think, again, to my prior question, is this the beginning of a long-term trend or just a one-month, one-off number?
JESSICA LAUTZ: I do think that we have seen the bottom. I think that hopefully home sales will continue to increase. Certainly, there's investors who are still in the market for primary residence buyers, thinking about those first-time homebuyers potentially. Millennials who want to enter into the market, baby boomers who are retiring, all of that is driving demand all at once. And so I think that we are going to continue seeing [INAUDIBLE] sales rise. I think we would have seen them higher if we had more inventory, and that's what we're really lacking right now.
SEANA SMITH: Yeah, Jessica, what is the inventory picture right now? Have we seen any improvement? Because it looks like, certainly, a lot of regions still lack that inventory. So then that also begs the question, how many offers are some of these houses getting?
JESSICA LAUTZ: Yeah, absolutely. So we still have under a million units right now for sale. And if we think about the demand that's there, it's really not meeting that. In fact, we're seeing 2.7 offers for every home that's out there right now. Again, better than last spring when we saw 5.5, but again, 2.7 is a lot. That means there could be a potential bidding war, especially in incredibly hot areas. And we know that every neighborhood has that special area that someone wants to move into. And that could have the potential of bidding up prices.
DAVE BRIGGS: Yeah, we're still seeing about 2 and 1/2 months of supply. We need about four to six to be truly healthy. We also saw prices decline, albeit 0.2%, but that was the first time in more than a decade that prices fell year over year. Again, regionally, where are prices falling the fastest? And do you think they'll continue to fall for the remainder of the year?
JESSICA LAUTZ: You know, I think it's hard to say with prices, especially when we know that there is the volatility in interest rates at the same time. If we look at where prices are really falling the most, we really are talking about those hot areas where we saw a lot of migration flow into, so the Boise's. Unfortunately, the Austins, Salt Lake City, we saw home prices being bid up competitively in those areas throughout last year. And so now we're seeing that shrink.
Now, I have to say, I don't know what's going to happen with home prices, but knowing that there's not much inventory, and there is potential demand out there. It means that there could be some equilibrium that happens. It continues to happen in the marketplace. And yes, 0.2%, sure, it's a decline, but we have to take that into context of 10 years of steady growth.
SEANA SMITH: And Jessica, on the map that we were just showing, certainly, the West Coast, we saw a huge jump, the month over month jump that we did see. What do you think we're going to see in terms of the fallout from SVB and some of the crisis that we are seeing playing out in the banking sector? Because yes, on the one hand, leads to lower rates because of the drop in the 10-year, but also the fact some of the instability there could cause some homebuyers to stay on the sideline.
JESSICA LAUTZ: It's possible, but I think any home buyer who's seriously looking is their first call is going to be to their mortgage broker and say, can I lock in a lower rate? And can I actually competitively get into the home buying market right now with that lower rate? And they're going to move forward with that. I think we all know that one regional bank is one regional bank. And it's not looking like a wider fallout at this point. So I don't think that they're going to be broadly concerned. That being said, if they're in the tech sector, if they're living in that local area, certainly, they're going to be feeling that worse than in other areas.
DAVE BRIGGS: Indeed. Jessica Lautz, thanks so much. Appreciate all that.
