Spring 2023: A Shifting Landscape in the US Housing Market
Introduction
Spring is typically a prime season for selling homes in the US, with warmer weather bringing increased activity and demand. However, 2023 may tell a different story. The US housing market is experiencing a significant shift, with rising home supply and potential government spending cuts expected to impact home prices. This article explores the current trends, the factors influencing them, and the implications for buyers and sellers.
Rising Home Inventory and Its Impact
The US housing market is seeing a notable increase in home inventory, with active listings in early March 2023 rising by 27.8% compared to the previous year, as reported by Realtor.com. This surge in supply is altering the dynamics of the market, shifting power from sellers to buyers. Homes are staying on the market longer, with the average listing lasting about 66 days in February, up from just over two months the previous year. This trend is evident in 42 of the 50 largest US cities, where homes are lingering longer than they did the year before.
Price Adjustments and Market Slowdown
As the market slows down, sellers are increasingly resorting to price reductions to attract buyers. In February, nearly 17% of listings had at least one price cut, up from 14.6% the previous year. This shift indicates a potential slowdown in price growth, according to researchers Sabrina Speianu and Danielle Hale from Realtor.com. The median US home price slipped by 0.8% to $412,000 from February 2022, although values were up 1.2% on a price-per-square-foot basis, suggesting that smaller, more affordable homes are coming onto the market.
The Influence of Government Spending Cuts
The potential impact of government spending cuts, particularly those proposed by Elon Musk’s Department of Government Efficiency (DOGE), could further destabilize the housing market. If these cuts lead to a significant reduction in the federal workforce, cities with a high concentration of government employees may see a surge in home listings, potentially driving down prices. Washington, DC, for instance, has already experienced a sharp increase in housing inventory, with a 46.5% year-over-year rise in mid-February, followed by a 48.3% increase in the last week of February and a 56.2% increase in the first week of March.
14 Cities at Risk of Price Declines
The analysis highlights 14 US cities where federal government employees make up at least 2% of the workforce, making these areas particularly vulnerable to fluctuations in the housing market. These cities include Washington, DC, where median home prices have already dropped by 1.6% from the previous year. Other cities with significant federal employment, such as Baltimore, MD, and Virginia Beach, VA, may also experience similar shifts in the coming weeks or months. The full list of cities, along with their median listing prices and year-over-year growth rates, provides a detailed view of the potential risks.
Conclusion
The US housing market is undergoing a significant transformation, driven by rising home inventory and the potential impact of government spending cuts. Buyers are regaining leverage as sellers face tougher competition and are forced to adjust their prices. While the market slowdown presents opportunities for buyers, it also poses challenges for sellers, particularly in cities heavily reliant on federal employment. As the market continues to evolve, it is crucial for both buyers and sellers to stay informed and adapt to the changing landscape.
