August 2023 Real Estate Market Update

August 20, 2023

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August 2023 Real Estate Market Update

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You may hear that home prices are falling. Home prices are falling, but not for the reason or in the way you might think. There is a seasonality to home price movement. Since 1973, home prices have always risen during the peak buying season in spring and summer, and gone down during the less busy times in the real estate market (fall and winter). This is price deceleration, not price depreciation. Home prices slow at this time of the year, as they have for the past 48 years. But they have not lost value. Home prices in the fall and winter go up, but just not as strongly as they do during the spring and summer months. Home prices are decelerating (increasing at a slower pace), rather than depreciating (losing value).


Looking at the current price movement in comparison to the 48-year average, home prices were still correcting from the astronomical appreciation we saw since 2020 (about 40% nationally, and about 30% in Tallahassee – far from the typical, annual 3-5% price appreciation). Then, as we continue through the latest numbers released, we see that seasonality return, where prices peak in spring and summer, and come down in fall and winter. Again, home prices are not falling because they are depreciating (loosing value). Home prices are declining because that is the typical, seasonal trend, but they are still appreciating in value.


And while inventory may be “up,” that is likely only true when looking week-to-week or month-to-month. A healthy market, balanced with buyers and sellers, has 6 months inventory on hand. Today, we sit at 1.8 months on hand nationally, and 1.9 months on hand in Tallahassee. A clear seller’s market.


There are simply not enough homes for sale.  The market can easily absorb a doubling of inventory. - Lawrence Yun, Chief Economist, NAR


There's a shortage of inventory, which puts an upward pressure on prices.



And while some sellers may be thinking today’s market is an opportunity to sell their home For Sale By Owner, there are some things they might want to consider.



And now, for the elephant in the room… mortgage rates. Here are the projections going forward. Something that helps us track where mortgage rates are headed are the actions of the Federal Reserve. Right now, they are trying to bring inflation down to 2%, at which point we will see the 10-year treasury yield lower and the spread, or difference, between the 10-year treasury and the 30-year mortgage rate come back in line with the 50-year average of under 2%.


Essentially, the 10-year treasury yield and the 30-year mortgage rate have has a symbiotic relationship for the past 50 years, in which the mortgage rate tends to lag behind the treasury yield by about 2%. However, recently that gap has widened, and the spread between these two is now over 3%. What that translates to is that mortgage rates will come down as inflation slows, but it is impossible to predict when. What potential buyers need to keep in mind, is that homes are still appreciating in value, so folks that bought their homes in Tallahassee in January 2023 are now looking at an appreciation of almost 13%. That means a $300,000 home in January is now worth $336,000. That’s an incredible gain for a homeowner! In addition, local lenders are great resources to discuss ways you can combat the current, high mortgage rates. Options like buying down the rate or adjustable-rate mortgages, may be just the option you need to purchase a home now and start earning equity.


And here's how we wrapped up the month in Tallahassee:







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