Home Values Hit New Record High As Homeowners Sit Tight (June 2023 Market Report)
By: Jeff Tucker
Home buyers shrugged off high mortgage rates but homeowners still wouldn’t come to the table, as new listings looked more like frigid February than a typical June
The typical U.S. home value climbed 1.4% from May to June, continuing a four-month streak of hot home value growth driven by several months of scarce new listings. The nation’s typical home value now sits at an all-time high ($350,213), just above the previous peak of $348,225 reached in July 2022.
The second quarter is traditionally the hottest time of year for the for-sale housing market, and that rule proved true in 2023. What comes next is less certain, as buyer demand typically begins to wane in the summer. But this year — like a test of the classic “unstoppable force meets an immovable object” paradox — that trend will be set against incredibly scarce new listings.
All major U.S. markets saw home values rise in June, but more than half remain below year-ago levels
Affordable metro areas had some of the biggest monthly home value gains in June, led by Chicago (2.1% increase from May), followed by Buffalo (2.1%), New Orleans (2.1%), Hartford (2.1%), and Detroit (2.0%). Those five markets all have lower typical home values than the national level ($350,213). By that standard, Los Angeles was the only expensive metro in the 10 fastest-growing markets (seventh biggest monthly gain, at 1.9%).
Home values grew, on a monthly basis, in all of the 50 largest metro areas, repeating May’s clean sweep. The slowest monthly growth was in Austin (0.4%), Jacksonville (0.8%), Memphis (0.8%), San Antonio (0.8%), and Birmingham (0.8%).
Prices kept rising amid tight inventory even in pricey West Coast markets that had big price drops in late 2022. For the third month in a row, tech hubs San Jose (1.6%) and Seattle (1.5%) saw monthly price gains above the national average, while San Francisco (1.0%) fell a step behind the national pace this month.
Home values are down from year-ago levels in just over half (27) of the 50 largest metro areas, most significantly in Austin (-11.2%), San Francisco (-7.7%), Phoenix (-7.2%), Las Vegas (-7.0%), and Sacramento (-5.8%). Annual price gains are highest in Richmond (5.3%), Miami (5.3%), Milwaukee (4.3%), Oklahoma City (4.2%), and Cincinnati (4.2%).
The lack of new listings only intensified this June
There were 28% fewer new listings than last June, reprising the jaw-dropping deficit observed in April after a more modest 25% year-over-year decline in May. This will probably mark the low water point for year-over-year comparisons in new listings – they began to plunge last July, so this year’s low flow will not look as extremely low by comparison.
It is worth pausing to contemplate just how low the trend ran in June, which is normally among the two or three busiest months of the year for new listings. This month only 376,500 new listings came to market, which is more comparable to the shoulders of the winter market doldrums, like February (about 341,500 average new listings) and October (about 384,100), than to the average new listings in June (505,100) in Zillow’s listings data which extends back to 2018.
The dearth of new listings has dogged the housing market for almost a year now, and the chief suspect remains unchanged: today’s higher mortgage rates (6.8% as of this writing, the highest since November, up from 5.3% a year ago and 2.9% two years ago). It would be costly for homeowners – most of whom have a mortgage significantly below today’s rates and intend to turn around and borrow for their next home purchase – to list their home.
Another potential culprit, with more optimistic implications, could be homeowners’ fear of selling for less than their peak potential sale price. On a national basis, home values declined 4% from their peak in mid-2022 until January — and fell much more in many parts of the country — before things turned around almost everywhere in the new year. That created a strange dual reality for the housing market this spring: Negative year-over-year price reports in many markets, coupled with surprisingly competitive shopping conditions that were sending prices back up on a monthly basis. It could be that some homeowners have been waiting until prices set new heights before opting to cash in their chips by selling. Our data indicate that home values crossed that threshold in June, on a national basis, but have not yet gotten back to their old heights in even half of the 50 largest metro areas.
Active inventory set a new low-water mark for June
Total active inventory in June was down 10.4% from last year, and a tremendous 44.9% below June 2019 levels. Last June had marked a watershed moment: Inventory climbed year-over-year for the first time since May 2019, as fewer sales left listings piling up. That trend continued well into winter. But this spring, as new listings slowed even more than sales, the inventory reservoir fell back below year-ago levels.
Some buyers forged ahead, in spite of high interest rates and low inventory
Newly pending listings clocked in at 16% below last June’s tally, marking the smallest year-over-year decline since last summer and continuing a trend of narrowing deficits since March’s 24% year-over-year drop.
On a monthly basis, newly pending sales dipped 4.7% from May to June, suggesting that seasonality will follow the trends seen in 2018, 2019, and 2022, when pending sales activity peaked for the year in May. Nonetheless, even in those years the third quarter was the second busiest, as buyer activity usually only gradually declines in the dog days of summer.
Another indicator of (slightly) slowing buyer activity, in a literal sense: the median pending sale took 11 days in June, one day slower than the seasonal low of 10 days to pending in April and May. The gradual tapering of sales volume and sales speed together indicate that negotiating power has likely begun to swing in buyers’ favor, and those who remain in the hunt should expect the pendulum to swing more in their favor as the summer wears on. That is the typical seasonal cycle of the housing market, and it has not deviated from seasonal norms so far this year.
Rents are now growing at a perfectly average monthly pace
Asking rents climbed 0.6% month over month again in June, a perfectly normal monthly growth rate for this time of year, based on pre-pandemic averages from 2015 to 2019. Rents are now only 4.1% higher than in June of last year, and cumulatively climbed only 2.4% in the first half of the year, somewhat below the usual 3.5% by the midpoint of the calendar. Like in the for-sale market, seasonal trends look to be returning to normal, which will mean a gradually improving competitive landscape for prospective renters as the year progresses.