U.S. Real Estate Market Trends, Outlook, Size, and Investment Opportunities 2023
By Leroy A. Brown
In the United States (U.S.) real estate market, homes are still considered unaffordable, specifically for first-time homebuyers.
Increased mortgage rates in the United States of America (U.S.A.) have helped to cause a decline in home purchases.
With inflation being high, geopolitical uncertainties arising, such as the Ukraine – Russia war, increasing interest rates, home prices getting higher, etc., the U.S. housing real estate market has become uncertain.
As of the start of 2023, mortgages are more than double the rate in early 2022, and home prices are at least six percent (6%) higher compared to a year ago.
The median home sales price was about $379,000 in October 2022, less than the record price of approximately $413,800 in June 2022, according to Forbes and the National Association of Realtors (NAR).
As homebuyers in the U.S. real estate market found it more difficult to secure mortgages, home sales dropped by approximately six percent (6%) from September to October 2022.
In November 2022, the U.S. real estate market saw home prices go up approximately three percent (3%) year over year, while the number of homes sold fell by approximately thirty-six percent (36%).
The number of houses for sale rose by about eight percent (8%).
In November 2022, the median home sale price was approximately $393,935, and the number of homes sold was about 379,958.
Since the construction of new homes collapsed because of the 2008 Global Financial Crisis or the Great Recession, which caused a housing crash in the U.S. real estate market, there has been a low inventory of houses for sale.
And with homes selling at higher prices, many bidding wars happening, and high demand and low supply, the United States (U.S.) real estate market is primarily a seller’s market.
Most experts do not believe there will be a housing market crash because homeowners have built up a significant amount of equity in their homes.
U.S. REAL ESTATE MARKET STATISTICS
U.S. real estate market overall 2022
According to Fortunebuilders, the median list price in the U.S. real estate market in 2022 was approximately $388,000.
The median rent for 1- and 2-bedroom units in 2022 was about $1,360.
The price-to-rent ratio was just under 22, and the total number of foreclosure proceedings in October was over 32,000 in 2022.
The median household income was just under $65,000.
Home Sales
According to the National Association of Realtors (NAR), sales in the U.S. housing market in November 2022 declined by almost eight percent (8%) from October 2022.
The sale of existing homes in the U.S. real estate market declined by approximately thirty-five percent (35%) in November 2022 since November 2021.
The U.S. existing home sales seasonally adjusted annualized rate was just over 6,300,000 in November 2021 and just over 4,000,000 in November 2022.
Seasonal adjustments are calculated using the X-13 Variant created by the Census Bureau to help remove variances that occur seasonally in resale activity.
For example, more people buy and sell homes in the summer because they are more likely to go and see properties in warm weather. While in the winter, fewer people buy and sell homes because they are less likely to go and see properties in cold weather.
Therefore, because of these seasonal differences, seasonal adjustments are made to give a better perspective of the U.S. real estate market.
The median sales price of existing home sales are as follows:
Just over $370,000 in November 2022 compared to just over $358,000 in November 2021 in the U.S. real estate market overall;
Just below $395,000 in November 2022 compared to just over $381,000 in November 2021 in the Northeast U.S. real estate market;
Just over $268,000 in November 2022 compared to just over $258,000 in November 2021 in the Midwest U.S. real estate market;
Just over $340,000 in November 2022 compared to just below $326,000 in November 2021 in the South U.S. real estate market;
And just over $569,000 in November 2022 compared to just over $558,000 in November 2021 in the West U.S. real estate market.
In November 2022, all four (4) regions in the U.S. had their home prices increased compared to a year ago.
In November 2022, the West U.S. real market showed the smallest median sales price of existing home sales increase of about two percent (2%), and the South U.S. real estate market had the highest median sales price of existing home sales increase of approximately four (4%) since November 2021.
Homes take longer to go from listing to contract in the U.S. real estate market compared to a year ago, i.e., about twenty-four (24) days rather than approximately eighteen (18) days.
Affordability
The REALTORS Affordability Distribution Curve and Score measures if a typical family at different income levels has enough income to purchase a typical home primarily using a mortgage loan, based on homes in the real estate market that will be sold or used soon.
The REALTORS Affordability Distribution Curve primarily shows the number of houses that are affordable to households by income, while the REALTORS Affordability Distribution Score measures affordability for all income levels.
The REALTORS Affordability Distribution Score for the U.S. real estate market overall is just below 0.65.
Some of the most affordable states were Ohio, Iowa, and Indiana, while some of the least affordable states were Hawaii, California, and Idaho.
According to the American Community Survey (ACS) – U.S. Census Bureau 5-year (i.e., 2017 – 2021) estimates that were released on December 8, 2022, about forty percent (40%) of households spent more than thirty percent (30%) of their income on housing costs such as rent or mortgage payments.
These housing costs are considered cost burdens by the Department of Housing and Urban Development.
According to the American Community Survey (ACS) – U.S. Census Bureau 5-year (i.e., 2017 – 2021) estimates data profiles, selected housing characteristics, the total occupied housing units in the U.S. real estate market is approximately 124,011,000.
Approximately sixty-five percent (65%) of the total occupied housing units in the U.S. real estate market are owner-occupied, and the rest are renter occupied.
Of the over 80,152,000 owner-occupied units, about seventy-three percent (73%) of them are valued at $150,000 and up.
Competitiveness
In the U.S., the real estate market can be competitive and have lots of bidding.
According to RedFin, by November 2022, some of the metropolitan areas with the fastest growing real estate market home prices in the U.S. were Overland Park in Kansas (KS), Naples in Florida (FL), Savannah in Georgia (GA), Greensboro in North Carolina (NC), and Manhattan in New York (NY).
By November 2022, some of the most competitive cities in the U.S. real estate market were Fayetteville in North Carolina (NC), Fort Wayne in Indiana (IN), Buffalo in New York (NY), Wichita in Kansas (KS), and Richmond in Virginia (VA).
According to Fortunebuilders, due to the Covid-19 pandemic, and working from home became more prevalent, many people decided to move from larger and more expensive cities to smaller and more affordable ones.
Partly due to this migration, rents went up in the cities that received these individuals.
The cities with some of the highest rent increases in 2022 were Tampa in Florida (FL), Tucson in Arizona (AZ), and Riverside in California (CA).
San Francisco in California (CA), Minneapolis in Minnesota (MN), and Pittsburgh in Pennsylvania (PA) were some of the cities that had some of the slowest rent increases.
Migration search
According to RedFin, roughly twenty-five percent (25%) of homebuyers in the U.S. wanted to move to a different city and state between October 2022 and December 2022.
Some of the most popular states homebuyers desired to move to were Florida, Arizona, North Carolina, Tennessee, and Texas.
Some of the most popular states homebuyers wanted to move from were the District of Columbia, Illinois, New York, California, and Massachusetts.
Dallas in Texas (TX), Orlando in Florida (FL), Phoenix in Arizona (AZ), Las Vegas in Nevada (NV), and Sacramento in California (CA), were some of the most popular metropolitan areas that homebuyers desired to move to.
Mortgage
Mortgages have doubled since early 2022.
In November 2022, mortgage rates increased to just over seven percent (7%).
According to Freddie Mac, the 30-year fixed rate mortgage averaged just over six percent (6%) of late in the U.S. real estate market. While a year ago, in early 2022, the 30-year fixed rate mortgage averaged just over three (3%) percent.
Additionally, the 15-year fixed rate mortgage averaged just under six percent (6%) of late, while a year ago, in early 2022, the 15-year fixed rate mortgage averaged just over two (2%) percent.
The Mortgage Credit Availability Index (MCAI) shows how easy it is to get a mortgage. The higher it is, the more options are available to have mortgage financing.
In 2006, the MCAI was above 850; in August 2022, the MCAI was approximately 108.
Investing in the U.S. housing real estate market
The Covid-19 pandemic that started in 2020 was the primary factor in U.S. real estate market home prices appreciating so much that it created a very competitive environment never seen before. And as biddings heated up, demand outpaced supply even more.
This resulted in a solid buyer’s real estate market.
One reason for demand exceeding supply was that homebuyers had more purchasing power as a result of the savings accumulated because they did not make as many purchases during the Covid-19 pandemic as they generally would.
Additionally, homebuyers had more money to spend due to receiving government stimulus payments during the Covid-19 pandemic and the benefits of having a low-interest rate at the time.
Another reason for demand exceeding supply is that there was a slowdown in new construction because of the 2008 Global Financial Crisis or the Great Recession, and now the Covid-19 pandemic. Thus resulting in fewer houses being available for sale, which increased demand.
Now that inflation is high, thus making things more costly, and interest rates have been raised to help combat inflation, homebuyers are basically in a bind.
When I say in a bind, I meant that homebuyers need more money to purchase homes as inflation has caused increases in home prices. And to compound this matter, the high-interest rates have made it more costly to borrow money.
And just when you think it could not get worse, the economic environment has reached the point where homebuyers may have to have an income of at least $100,000 per year to qualify for a mortgage.
This $100,000 per year in income is not encouraging as the real median household income in 2021 was just below $71,000 per year, according to the U.S. Census Bureau.
The 2021 figure was lower than the 2020 figure, which was just over $71,000.
The difference between 2021 and 2020 may suggest incomes are going down, which is not good, as prices are rising.
Even though home prices are going up because of inflation, the increase in interest rates is helping to slow the pace.
Nevertheless, there are fewer buyers now, even as house prices appreciate slowly.
However, there are still ways to invest in the U.S. real estate market.
One such way to invest is flipping.
In real estate, flipping is buying a property and selling it for a profit in a short time.
As home prices continue to appreciate, buying a property and then selling at a higher price may be profitable.
Another way to invest in the U.S. real estate market is to have rental property.
A rental property is where you purchase a real estate like a house and then rent or lease it for a profit from the monthly revenue.
Of the many ways to invest in the U.S. real estate market, you may venture into foreclosures.
Foreclosure is a legal process used by lenders to recover money owed. They do this by selling the property and using the proceeds to recoup the debt owed.
Because these foreclosure properties are usually sold below market prices, you may buy them at lower costs and then sell them at market prices for a profit.
Of course, these are ways you may invest in the U.S. real estate market. There are many other ways, such as tax deeds, tax liens, crowdfunding real estate, wholesaling, etc.
So go ahead, do your research, and choose the real estate investment option that is best for you.
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