New-Home Sales Rebound
The pick-up in home sales also was felt in the new-home market last month. The National Association of Home Builders credited builders’ sales incentives—such as mortgage rate buydowns, paying points for buyers, or even offering price reductions—for helping bring home buyers back to the market. Fifty-seven percent of builders have reported using incentives to bolster sales, according to NAHB surveys.
“Buyer incentives, along with stabilizing mortgage rates during the month of January, increased the pace of new home sales for the month,” says Alicia Huey, chair of the NAHB. “However, in a sign of current market weakness, sales are down 19.4% compared to a year ago.”
Affordability is still weighing on home buyers. The median price for a new home has fallen for three consecutive months and is down compared to a year ago, says Danushka Nanayakkara-Skillington, the NAHB’s assistant vice president for forecasting and analysis. For the third consecutive month, the median new-home price fell after peaking in October at $496,800. In January, the median price was $427,500, down 8.2% from December.
Home buyers are finding more available inventory in the new-home sector. Completed, ready-to-occupy inventory jumped 115% compared to a year ago, although that comes after particularly low levels in 2022. Ready-to-occupy inventory also only comprises 17% of the total stock of new homes, builders note.
Have Austin Metro Prices Found Bottom?
For January 2023, Year Over Year Avg Price declined -2.5% and we expect YOY prices to continue to decline well into 2023, but this is not an accurate measurement of price trajectory since it lags well behind current market conditions. Prices jumped +18% in the spring of 2022 and then fell -18% through the remainder of 2022. We now want to look at Month Over Month pricing trends to see when the market has found its bottom and begins to recover. January 2023 is the third month with minimal MOM changes and it was almost identical to Dec 2022. Because we see an uptick in demand and we’re entering the busy spring season, we do expect to see prices begin to tick up on a MOM basis, which would be an even stronger indicator that prices bottomed in Winter ‘22-23.
If You’re a Buyer
Things are good for you. WHY? If you’re interested in a new construction home, then things are really good for you. Rates are historically good, but not great on a 10-year lookback. You will likely be able to refinance at a better rate in the next 1-3 years. The stock market hasn’t recovered, so it’s important to strategize how you’ll fund your down payment. Most of my recent buyers have all been those who got out of the market in late 2021 or early 2022 because the competition was just too fierce for them. However, in the past 4-5 months, buyers have been finding good deals on homes at list and under-list prices with lower down payments, and negotiating seller costs like seller-paid title, home warranties paid, and even survey costs paid by sellers.
With these types of incentives, some buyers are even getting great results on seller concessions toward closing costs to help with interest rate buy-downs from various lenders. Some sellers have been landlords who owned 1-2 rental properties and with the 2022 property tax bills they received, some landlords were just unable to handle the larger increases in property taxes and still stay above water with PITI (principal, interest, taxes, insurance) costs on their investment rental homes, so, those homes hit the market for buyers to snap up. (There are options beyond selling investments, so please reach out if you’d like to discuss your options.)
If You’re a Seller
The market is certainly better than Q3/Q4 2022, but that’s a low bar. Realistic and competitive pricing is absolutely critical. We strongly believe that seasonality will affect the market heavily in 2023. The worst situation you can put yourself in is to overprice and chase the market down through the summer and into the fall. Specifically, if you’re in the luxury market or in a market where builders are actively delivering homes, then strategy and pricing strategy are more important than they’ve been in 15 years.
My advice to sellers: BE PATIENT – PRICE APPROPRIATELY – PREP THE HOME. By doing these three things as a seller, you’ll have the best competitive advantage on selling your home at a market price buyers are willing to pay due to the increased competition of more inventory than the Austin market has seen since 2018.
Always bear in mind that real estate is hyperlocal and hyper-situational so please reach out to us if you have questions about your specific market or situation. We’d absolutely love to help!
Final Notes to Readers:
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