Summary
- Total annual home sales in the U.S. in 2023 dropped to the lowest level since 1995
- The sale of existing homes in the U.S. slid 19% in 2023
- In January 2024, the typical seller received 2.7 offers, and 16% of homes sold over list price
- From March 2020 – January 2024, existing home prices climbed 35.7%
- From March 2020 – January 2024, household family income climbed 22.9%
- At the end of 2023, 15% of metro areas had double-digit home price gains
It’s no surprise that demand for housing is higher than the number of available homes for sale. Insufficient housing inventory is a chronic problem across most of the nation – but just how out of sync it’s become is startling.
Home sales last year dropped to the lowest level in nearly three decades, and despite a modest uptick in January, the housing market continues to have a deficit in housing inventory, Jessica Lautz, deputy chief economist and vice president of research at the National Association of Realtors, testified during a hearing before the House Committee on Financial Services Subcommittee on Housing and Insurance on March 20.
Existing home sales, which make up most of the housing market, slid 19% in 2023 from the prior year to 4.09 million, the worst annual level since 1995. In January, 1.1 million existing homes were available on the market. In comparison, there were 1.49 million existing homes available for purchase in March 2020, according to data from the National Association of Realtors. As a consequence of the underproduction of new homes, the typical age of homes purchased is 38 years, and 85% of homes purchased were existing homes, as opposed to newly built homes.
Fewer homes, higher prices
Lautz attributed the retraction in the housing market to fewer existing homes being put on the market, not enough new construction and an erosion in housing affordability.
Limited inventory is pushing home prices up and more potential buyers out of the market, Lautz said.
The associations’ research confirms bidding wars for homes are more frequent due to the lack of housing inventory, Lautz said. She outlined research from the association showing that in January 2024, the typical seller received 2.7 offers, and 16% of homes sold were over the list price.
From March 2020 to this past January, existing home prices have climbed 35.7% while household family income has climbed 22.9%. In the fourth quarter of 2023, 15% of metro areas had double-digit home price gains.
“First-time home buyers continue to struggle to enter the housing market, lacking the housing equity that boosts the purchasing power of repeat buyers,” Lautz testified.
First-time buyers accounted for 32% of primary residence buyers last year, which remains well under the historical norm of 40%, she said.
While there is a smaller share of first-time buyers, they also are older than they have been historically. In the 1980s, the typical first-time buyer was in their late 20s; they are now in their mid-30s. Among first-time buyers who can enter the market successfully are those with household incomes of nearly $25,000 more compared to those who purchased homes during the previous year, Lautz said.
Lautz noted the homeownership rate has risen for each racial and ethnic group in the last decade, with Asian and Hispanic households at all-time highs. There still remains, however, a 28% percentage point difference in the homeownership rate between white and Black households.
The upside for homeowners
The typical homeowner has benefitted from the rise in home prices. The typical net worth of a homeowner in 2022, as reported by the Board of Governors of the Federal Reserve System, is just under $400,000, compared to just over $10,000 for a renter.
“The wealth held by homeowners is 40 times that of a renter,” Lautz said. “Housing wealth can be used to help children attend college, pay for remodeling costs on the home, in retirement or even help their own children achieve the dream of homeownership.”
Silicon Valley Association of Realtors (SILVAR) is a professional trade organization representing 5,000 Realtors and affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term Realtor is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of Realtors and who subscribes to its strict Code of Ethics.
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