Majority of the strongest performing markets have median sale prices under $350,000
Home prices are expected to increase by 2.2% over the next 12 months according to the 2023 Q3 VeroFORECAST, a report released by Veros Real Estate Solutions, a software company.
How is the housing market faring in Q3 2023?
According to the report, nine out of the 10 strongest performing markets had median sale prices that were under $350,000 for existing homes. This was below the national median. The market performing the best was Rochester, NY which was projected to appreciate by 6.4%.
By contrast, the worst performing cities were in California, Idaho, Texas, Utah, and Washington where it was forecast that the range of their depreciation was from -2% to -4%. The median housing prices were either at or above $500,000 in Utah, Boise, and Austin. They were even higher in Seattle, San Francisco, and Santa Rosa.
The most pressing issue surrounding the housing market is the lack of available homes for sale, it was suggested.
“Forecasts suggest that this predicament is here to stay for the foreseeable future, stretching into months, and quite possibly, a couple of years,” said Reena Agrawal, research economist at Veros Real Estate Solutions.
“The chief culprit behind this housing conundrum is the expectation of prolonged high mortgage rates. This is because the Federal Reserve is likely to hold interest rates higher for longer to combat inflation and will probably increase rates further. Adding to this supply squeeze is the high cost of construction, which places a substantial damper on the prospect of new housing stock entering the market,” she added.
Agrawal further stated that demand for housing had persisted despite rising interest rates. A third of home purchases were made through all-cash transactions, which the economist said underscored the persistence of home-buying activity.
The market is also being impacted by millennials beginning to tread the housing landscape.
“These young buyers are not going it alone; many receive substantial financial backing from their affluent baby boomer parents,” said Agrawal.
“This dynamic brings an interesting twist to the market, wherein high-interest rates predominantly affect a subset of potential buyers, some of whom are exploring more cost-effective avenues, while others contemplate deferring homeownership for another time,” she added.
The VeroFORECAST evaluated the prices of homes in over 300 of the nation’s largest housing markets. The current report is based on the data of 311 Metropolitan Statistics Areas (MSAs) which included 16,734 ZIP codes, 971 counties, and 82% of US residents.
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