The past year had several unexpected changes in the real estate market — the most significant of which was the impact of inflation and the subsequent raising of interest rates by the Federal Reserve. With year-end statistics now available, we now know that “inflation slowed on an annual basis for a sixth straight month in December (to 6.5%), a relief for households and an encouraging signal for the Federal Reserve.” (NY Times, Jan. 13)
Mortgage rates rose throughout most of 2022, spurred by the Feds campaign of interest hikes. By year-end, the 30-year fixed-rate mortgage averaged 6.33%, with a spike in rates above 7% in October. In comparison, a year ago the 30-year fixed-rate mortgage was 3.45% (Freddie Mac). According to Sam Khaler, Freddie Mac’s chief economist, “While mortgage rates have resumed their decline, the market remains hypersensitive to rate movement, with purchase demand experiencing large swings relative to small changes in rates.”
Residential Real Estate Market - National and Local Statistics
Turning to the national residential statistics, we see that the number of home sales fell as rates rose. Home prices and interest rates that doubled last year have pushed many people, particularly younger, first-time buyers, out of the market. Simply put, mortgage rates and payments have outstripped wage gains, particularly as home prices have appreciated in double digits—15 to 20% in some markets. As a result, total residential home sales dropped to an estimated 4.1 million units in 2022—far below the rate of 6 million units in 2019.
The key national statistics as reported by the National Association of Realtors are:
- Existing home sales fell for the tenth consecutive month. Sales slipped 7.7% from October and 35.4% from the previous year.
- The median existing-home price rose to $370,000, an increase of 3.5% from one year ago.
- The inventory of unsold existing homes declined for the fourth straight month to 1.14 million or the equivalent of 3.3 month’s supply at the current monthly sales pace.
Here in Northeast Florida, affordability was heavily impacted by these macroeconomic issues. One of the most frequent questions we get from buyers is “When do you expect housing prices to decrease?” Realistically, we are not anticipating home prices to drop significantly in 2023 and, Zillow (the national real estate website) predicts NO price decrease over the next 12 months.
Over the last ten years, we’ve seen huge appreciation in median price home values in Duval County. Duval County is in the top 10% nationally for median home price value increases. These rates continued to grow throughout 2022, more so than in nearly every other city or town across the nation.
To summarize, a number of factors suggest that price adjustments, or potential declines, will be moderate, as a seller’s market continues to predominate locally.
- Steady population growth, in-migration, and a high availability of jobs.
- Low level of listings, and little urgency to sell from owners that are holding mortgages at yesterday’s low rates.
- Still very low median days on the market.
- Very high percentage (96% and above) of list price received.
- Low rate of new home construction, and major delays in delivery times, due to supply chain disruptions.
Closer to home in Ponte Vedra Beach we see the following:
- Median sales price climbed 22.2% through December, year-over-year from $900,000 to 1,100,000.
- Closed sales dropped by 23.9%.
- List price received stayed high at 98.3%, a drop of only 1% since 2021.
- Pending sales are down 25%.
- New listings are up, but only by 2.6%.
- Inventory remains very low in all of the Jacksonville Beaches communities and the average days on the market, while rising, is still very low.
What Our Team Has Experienced
Our team is seeing a slow down in the hysterical pace of purchasing that dominated 2021 and the first half of 2022. Since homes are on the market for (slightly) longer, buyers aren’t having to make purchasing decisions on the spot. Multiple offers are still common on homes that are up to date and move-in ready, but we’re seeing two or three offers instead of 40 offers. Buyers are also asking and receiving more concessions from sellers when it comes to home inspections.
In our area, there are numerous reasons to expect that the market will continue to be favorable to sellers. Ponte Vedra continues to be a highly attractive and desirable community, with superior schools, beautiful beaches, abundant golf courses and many other amenities—and homes that are increasing in value.
As we enter this new market, our team is adjusting our behavior. We have more listings coming on the market this month than in any previous January. We’re prepping those listings so they appeal to the greatest number of buyers. The buyers we’re working with have adjusted their expectations and are working with the current mortgage rates. These buyers are seeing more concessions from sellers regarding home inspections and repairs. We’ll continue to closely watch the market and be ready to adjust to the impact of rising and falling interest rates for our sellers and buyers.