High interest rates and a depleted housing stock have kept activity low but prices high across the pond. Foreign buyers have been thin on the ground too. But as we approach the end of 2023, signs point to a likely shift in the US property market next year. We look at the headline data!
Your US property update for the end of 2023.
Expensive mortgages, limited choice of homes and rising values have favoured neither vendors nor the majority of buyers in the US during 2023. Taking a nationwide view, the market has been a bit of a washout. Only savvy cash-buyers from abroad buying in desirable pockets are likely to be smiling by the end of the year.
“Twenty-year-high mortgage rates have held off homebuyers,” said chief economist at the National Association of Realtors (NAR), Lawrence Yun in a November statement. “There’s also a lack of housing inventory to sell, which means fewer opportunities for sales in the marketplace.” Yun predicts that home sales (volume) will decline by 18 per cent year-on-year once all the numbers are in for 2023. Last year the drop was 17 per cent.
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Less activity, higher prices
Much like the first half of 2023, activity has been equally dismal in the second half of 2023. The number of resale homes sold across the country in October was 4.1 per cent lower than in September and a significant 14.6 per cent compared to a year ago, reported the NAR. Figures include existing detached houses, townhouses and condominiums.
At the same time, price rises appear to be accelerating on a nationwide level. The median price across all housing types increased by 3.4 per cent in October, hitting $391,800 compared to $378,800 in 2022 (NAR). All four US regions – Northeast, South, West and Midwest – registered price increases.
Looking closer at single family homes – the bellwether of the US market, prices in this sector rose in 82 per cent of metro areas across the US during the third quarter of 2023. Price appreciation even hit double digits in 11 per cent of these areas, compared to just five per cent in the previous quarter.
According to NAR data, the median single-family home price increased 2.2 per cent, compared to the July-September period in 2022 and now sits at $406,900. In the previous quarter this year, the median price was 2.4 per cent down year-on-year.
Rate expectations
Now for some better news. Yun believes the 30-year mortgage and Federal Reserve rates have crested, which should fuel a turnaround in the market. “I believe we’ve already reached the peak in terms of interest rates,” he said in his NAR statement. “The question is when are rates going to come down?” He predicts a drop to between six and seven per cent by the spring 2024 buying season, when “pent-up sellers” won’t wait any longer and will enter the market. The forecast for resale home sales is an uptick of 15 per cent on 2023.
Since the Federal Reserve kept interest rates in the 5.25-5.5 per cent range, following its last raise in July 2023, mortgage rates have begun dropping. By mid-November, 30-year fixed rate mortgages averaged 7.44 per cent, after dropping for the third consecutive week (Freddie Mac’s Primary Mortgage Market Survey). Similarly, 15-year fixed rate mortgages averaged 6.76 per cent. A year ago, the 30-year average was 6.61 per cent (November 2022) and 5.98 per cent for 15-year terms.
Foreigners spending more
Economic conditions at home and abroad have affected the US’s foreign market, which saw transactions drop to the lowest level for 14 years. For the year April 2022 to March 2023 purchases by international buyers totalled 84,600. This represented a year-on-year drop of 14.2 per cent and lowest figure since 2009, according to the NAR’s Annual Foreign Investment report. In value terms, foreign transactions fell 9.6 per cent year-on-year for the period. Of the $53.3billion spent by international buyers, $23.4 billion came from foreigners already permitted to reside in the US. The remaining $29.9 billion came from non-resident foreigners represented a year-on-year rise of 20 per cent. This indicates that the fewer number of foreign buyers are spending much more on their US home. In fact, NAR reports the average and median foreign spend – $639,900 and $396,400 respectively – has hit record levels. More than half of non-resident foreigners (52 per cent) are buying outright in cash, compared with 32 per cent of resident foreigners. Also notable, half of foreigners purchase their property for use as a vacation home, rental property or both, and 59 per cent opt for detached single-family homes.
Sun shines on the Sunshine State
23% of overseas buyers look to Florida.
One of the world’s top tourism destinations, a go-to state for American snowbirds and retirees combined with a booming economy and business community all mean the Sunshine State’s real estate market continues to outperform most other parts of the US.
It remains the country’s top destination for foreign buyers, accounting for 23 per cent of international purchases (April 22-March 23). California and Texas are second favourites (12 per cent each), followed by North Carolina, Arizona and Illinois (four per cent each).
Across the state in September sales of single-family homes rose 6.1 per cent year-on-year and for condo-townhouses dropped just 0.2 per cent. Looking at Q3 of this year, single-family homes sales were down 3.2 per cent and 5.8 per cent for condo-townhouses – both significantly outperforming the national levels.
Florida – where all the fun is!
This is a three-bedroom home in Mount Dora, Orlando for $269,536.
As proof of the Sunshine State’s desirability, five of the US’s top 10 go-to destinations for citizens moving for a better lifestyle within the country are located in Florida. These are the metros areas of Orlando, which was ranked third, then North Port-Sarasota (5th), Tampa (7th), Cape Coral (8th) and Miami (9th). The list was topped by Sacramento (California) with Las Vegas (Nevada) in second, then Myrtle Beach in South Carolina (4th), Portland in Maine (6th) and Salisbury in Maryland (10th).
In tune with this, realtors in South Florida are noticing a surge in demand and prices in the luxury condo market. A recent migration trend has brought Amazon founder Jeff Bezos and other high-profile names to the famous metro on Florida’s south-east coast.
Penthouses with $50 million-plus asking prices are no longer a rarity in areas like Brickell, Miami Beach and Fisher Island.
“People are continuing to move to South Florida in record numbers, and there have been lots of celebrities and ultra-wealthy people wanting to call South Florida home,” said a local realtor. “I expect that we’re going to see a lot more of this in the future.”
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