The housing market is showing signs of improvement, with sales volumes increasing by 32% in March compared to February. However, sales are still down 25% from the same period last year, as many institutional investors and companies like Opendoor are not as active in the market as they were a year ago.
Buyer demand has weakened due to higher interest rates, but this has been offset by a sharp drop in supply. Active listings without a contract fell by 5.5% in March, while listings under contract only fell 1.9%. This imbalance between supply and demand has been consistently moving in favor of sellers since mid-November, indicating a rebound phase from the correction that dominated the second half of last year.
Despite concerns expressed on social media and in the news, the current housing market is healthier than it was in April 2019. While demand may be weak, supply is weakening much faster, causing interest rates to no longer be the driving factor in the market. With a chronic shortage of homes to buy, competition between buyers is heating up.
Prices have risen faster than expected, with the monthly median reaching $419,900 and the average closed price per square foot at $277.60, up nearly 5% in just seven weeks. The listing success rate has also rebounded to 78% from a low of 62% in November 2022.
Foreclosure activity remains low, and new construction permits for single-family homes are also limited. Sellers have been offering generous incentives, including interest rate buy-downs, but as they realize they have the upper hand in negotiations, these incentives are likely to reduce in value.
It’s important for buyers to recognize that the market is in a new and different phase, and to expect increased competition from each other as they chase a dwindling number of homes for sale.