2023 Real Estate Market Recap

As 2023 winds down it seems everyone who had an opinion about the real estate market in January is either saying "I told you so", or on the other hand confused and uncertain. Thankfully, I am one of the people who can proudly say "I told you so". This was my forecast for the 2023 real estate market in a blog post from September 2022.

To view the full article from 2022 click here.

And that is exactly what happened in 2023. Prices increased, interest rates increased, Inventory increased, volume decreased and affordability decreased. 

Here Are a Few Key National Stats That Depict This:

• The number of homes sold decreased 7.3% in 2023 compared to 2022.
• The median sale price increased 4% in 2023 compared to 2022.
• The amount of available inventory increased by 6.1% YTD compared to 2022.
• Locally, in Cincinnati, the number of homes sold decreased by 24% and home prices increased by 8.1%.

These statistics clearly show that the market is slowing down, cooling off, and preparing for a structural shift that is still 2-5 years away ASSUMING the market maintains its current trajectory. Currently, fewer People are buying homes simply due to affordability. With fewer people buying homes, and builders continuing to build new homes, inventory is slowly increasing. But despite the modest increase in inventory, there are still just not enough homes in America. This inventory shortage is a key factor in why prices are still not decreasing.

Here is a chart that shows the deficit in homes available for middle-income families.

In 2023 the number of homes that sold between 100K and 250K decreased by 14.6% from 2022, and homes sold from 250K-500K decreased by 3.6%. But, homes sold in the 1M+ price range increased 25%.

Housing is becoming less affordable to the average person. Data shows that in Cincinnati only 24.4% of all renters can afford to purchase the median-priced home. On a national level, data shows that the median family income is only 94% of the income required to qualify for the median-priced home! This means that the income required to qualify for the median mortgage is higher than the income of the median family.

Quarterly Housing Affordability Index

The Real estate market is in dire need of affordable housing, the chart below shows the number of listings missing per income group according to the National Association of Realtors statistics.

To Summarize, despite the relative 2023 inventory increase, there are still not enough affordable homes for sale. This is the result of high interest rates forcing first-time buyers out of the market, and forcing current homeowners to stay put.

With fewer middle-class families selling their homes to trade a 3% rate for a 7% rate. The inventory for middle-class homes is suffering, creating a supply & demand issue that fuels price increases.

2023 saw the effects of this phenomenon with decreased sales volume, which tells us that there is light at the end of the tunnel. If rates drop, and inventory continues to increase, prices will have to come down as the supply & demand curve evens out. From the looks of it, 2023 was just another year setting the stage for what will be the most interesting 3-5 years in real estate that we have seen in a long time.

Click here for my 2024 market outlook.   

-Cameron Gunnels

The statistical information in this blog is sourced from the National Database of (NAR).