Blog > March 2023 Real Estate Market Overview
The current real estate market has been a topic of discussion for many investors and homebuyers alike. Despite the pandemic and economic uncertainty, the real estate market has remained robust, with record-high home prices and continued buying and selling activity.
One factor that has impacted the current real estate market is the higher-than-normal spread between the 10-year treasury and the 30-year mortgage rate. Historically, this spread has been around 1.8%, but due to concerns over inflation, the current spread is around 3%. This means that mortgage rates are higher than they have been in the past, especially in comparison to the 10-year treasury, which can impact home affordability for some buyers. With the impending March 14th CPI report though, there is a chance that we may see some regression to the mean (rates coming closer to 1.8% above the 10-year treasury) if CPI report shows a positive outlook. However, it is important to note that the spread between the 10-year treasury and the 30-year mortgage rate is not the only factor that impacts the real estate market. Other factors, such as supply and demand, also play a significant role in determining home prices and buying activity.
One of the biggest challenges facing the real estate market currently is a shortage of available housing. According to the National Association of Realtors, the inventory of homes for sale is at a historic low, with just 1.03 million homes available for sale as of January 2021. This is a 25.7% decrease from the same time last year. The shortage of available housing is due in part to the slow pace of new home construction. Between 2010 and 2020, the amount of available housing units only went up by 6.4%, while the number of adults over the age of 18 increased by 10.3%. This means that housing is not being built as fast as the population is growing, resulting in a shortage of available homes. The shortage of available homes has also impacted home prices, with prices reaching record highs in many parts of the country. This has made it challenging for some buyers, particularly first-time buyers, to afford a home. However, even with higher home prices, we have seen continued buying and selling activity in the real estate market.
One reason for this continued activity is the low interest rates that are still available for homebuyers. While mortgage rates have increased slightly from historic lows, they are still relatively low compared to historical averages. This has made it possible for many buyers to still afford a home, despite higher home prices.
For those who own leveraged assets such as real estate, experiencing inflation allows for leveraged net worth gains. This is because property values and rental income typically rise with inflation. For investors, this can be a positive signal to continue buying, especially if they are purchasing investment properties.
Another factor that is impacting the real estate market has been continued effects of the pandemic. With many people working from home, there has been an increased demand for homes with more space, such as larger homes or homes with home offices. Additionally, with interest rates low, many people have been motivated to move to more affordable areas, which has also impacted the real estate market.
While concerns over inflation have caused an increase in mortgage rates, there are still many positive signals for continuing to buy in the current real estate market. The shortage of available homes and the potential for leveraged net worth gains make it an attractive option for both homebuyers and investors. However, it is important to keep in mind that the real estate market is complex and impacted by many factors, so buyers and investors should always do their due diligence and consult with a real estate professional before making any decisions.
To connect with a real estate professional at The Axon Group, please email us at info@theaxongroup.com