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Answering all those burning questions you didn’t know you had about home ownership.

2023: Housing Market in Review

Picture of Jessica Dabkowski

Jessica Dabkowski

Helping you with all things homeownership!

It’s 2024, and we’re gearing up for a great year! But let’s take a look back at where we’ve been first, shall we? It’s time for 2023 Housing Market in Review!

The housing market in 2023 was a bit of a conundrum. I think this quote really sums it up.

“It was the market that worked for nobody,” says Chief Economist Danielle Hale. “It was a year with a lot of fence-sitting.”

A Look Back at 2023: The Year the Housing Market Froze Over

For those of you who weren’t actively in the market to buy or sell last year, it was as if the market came to a screeching halt after three years on a racetrack.

The market came to a “screech“ing halt.

Home Prices Rose to Record Highs

With the rise in interest rates, many consumers hoped that the price growth trajectory would decline or at least flatten out. If you’ve been following along with me, you may remember I predicted this result was unlikely in 2023 based on the competing pressure placed on price by the extremely low inventory of homes for sale.

In 2023, the national average median sale price of a home climbed from $407,000 in 2022 to $409,000.

“The unusual combination of low supply and low demand caused home prices to remain elevated throughout the year, which was bad news for pretty much everyone,” laments Daryl Fairweather, Redfin Senior Chief Economist. “The market was extraordinary; it felt hot, even though very few homes changed hands.”

2023 Housing Market Year In Review: A Market Ruled by Mortgage Rates

I ran a quick snap of the I-275 Corridor from Canton/Westland up through Novi and over to Livonia, which revealed the median sales price of single-family home in December 2023 reached an all-time high of $390,500, up 5.5% from December 2022 when it was $370,000.

Map for my I-275 Corridor stats

Mortgage Rates Spiked

Mortgage rates climbed past 8% for the first time since 2000. The increased rate translated to increased payments. In July 2023, the average mortgage payment reached $2,605, an increase of 19% from the previous July. This scenario put a real crimp on affordability and, frankly, desire to both buy and sell.

Remember this countdown?

Buyers were reluctant to purchase a home for a substantially increased price over two years ago, and potential sellers were reluctant to forfeit the rockbottom rates they had locked down. Just under 25% of owners had a rate below 3%, while 90% of owners held rates under 6%.

While the rates did drop back down into the 6% range by the end of the year, predicting rates for next year is tricky. In December, the Fed held on rates and announced it anticipated making three rate cuts in 2024. Let me tell you, there was much rejoicing by people attached to the housing market.

Just as a reminder, the Fed does not set mortgage rates directly, but the mortgage rates are influenced by the rate set by the Fed (the rate at which banks lend each other money overnight).

Low Inventory

The low inventory was at the heart of the market data this year. Nationally, there was a 16% drop in new listings between 2022 and 2023.

In that I-275 Corridor, we saw a pretty steady decline from 173 new listings in January 2023 down to 110 new listings in November. November was down 32% year-over-year, bottoming out to the lowest level for the three year period of 2020-2023. THEN, there was an INSANE spike to 178 new listings in December 2023. Let me rephrase — December 2023 had the most new listings of any month in the year, and this is with the holidays in full swing!

In a surprising twist amidst this record low inventory, the housing absorption rate actually increased. (Now I know you’re thinking, “what the heck is an absorption rate?”) Housing absorption calculates how quickly we would run out of houses to sell at the current rate we’re going – i.e. how quickly is the market absorbing houses for sale, measured in months. In 2023, that number was 2.6 months, an increase over the 2.1 month statistic from 2022.

In the I-275 Corridor, the absorption rate for December 2024 was 1.3 months, which is quite a bit lower than that national statistic. This stat waffled between 1.0 and 1.8 over the course of the year. You see how these stats can all be very market specific.

Hard Sell: Fixer Uppers

To me, these seemingly disparate figures of low inventory but slower absorption actually make sense. On one hand, if there’s less inventory, you would think more houses would be snapped up quickly. While this scenario holds true for updated, move-in ready homes, I can tell you from my observations a lot of these fixer uppers on the market are just sitting . . . sitting . . . sitting. These long time sitters tend to skew the absorption rate numbers a bit.

Fixer uppers are a tough sell right now. Firstly, buyers don’t want to pay top dollar for a fixer upper. Second, with the interest and mortgage payments high, buyers don’t have as much flexibility to access funds to make improvements. This lack of access could be due to needing additional downpayment funds to bring the payment down to manageable or because the buyers cannot afford to take an additional home improvement loan from the bank.

Fixer uppers were not so popular in 2023.

As a result, we saw the national Days On Market statistic go from 27 days in 2022 to 37 days in 2023. In my observation, sellers were accepting offers in less than two weeks or houses were sitting for months, and not much in between (I exaggerate, but it illustrates the pattern I was observing in the market.). Overall, the statistic indicates that more houses were sitting for a longer period of time.

That I-275 Corridor had an average median days on market of just over 27 days, so quite a bit lower than the national average for how long homes sat on the market.

Cash Is Still 👑

Almost 1 out of 3 homes (32.7%) purchased last year was closed with cash. Now, as one snooty agent once said to me, “all closings are cash.” Well, duh, in the end that is true, but a buyer who brings a cash offer is not dependent on meeting the stringent mortgage requirements to acquire the cash to purchase.

Cash sales were especially prevalent at higher price points. The higher rates lead affluent buyers to plunk down cash rather than shell out for the higher interest rates. Despite this fact, luxury home sales logged the steepest year over year decline on record translating to a 10.5% drop.

That’s our 2023 Housing Market in Review. I’m excited to kick off a new year of adventures with you. As always, I’m here to help with all your homeownership questions.

Photo by Karolina Grabowska

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