An unusual year in the housing market was closed by an unusual and unseasonable bump in available inventory to close out the fourth quarter of 2023, but home sales were few and far between as seasonal factors combined to make for a desolate market.
According to NerdWallet, homes were listed at nearly five times the potential first-time buyer income in the fourth quarter, on average across the country. Prices fell slightly from the previous quarter, as is common in the final months of the year. Bucking seasonal trends, inventory rose 9% from the third to the fourth quarter, reaching a level not seen since late 2020. But mortgage rates peaked in late October, hitting about 7.8% for the 30-year fixed, an over-two-decade high, before trending downward through the holidays and into the new year.
First-time buyers were especially hit hard by market conditions, although, that said, first-time buyers are always fighting strong headwinds no matter the market. They are generally earlier in life and career than repeat buyers, and they lack the wealth associated with equity that existing homeowners can draw upon.
Seasonal swings in inventory are typical, especially the colder it is
Typically, home prices recede as winter sets in, and inflation-adjusted list prices were 4% lower across the nation in the fourth quarter. List prices matter because they likely play a significant role in would-be home buyers’ decisions to get serious about home shopping.
NerdWallet further said that by comparing list prices versus the median income of people in the typical first-time buyer age range provides a good gauge of affordability. And while homes were listed at 4.9 times this income across the nation, the largest metros demonstrated that buyers shouldn’t necessarily base their decisions on national numbers.
Affordability is more than just how much a home costs; there extraneous factors such as mortgage rates, property taxes, and insurance. With interest on a 30-year fixed mortgage averaging 7.3% in the fourth quarter, the monthly principal and interest payment on a median-priced home would be about $2,290, assuming a 20% down payment. By contrast, if rates were a percentage point or so lower—where projections show them going by the end of 2024—that monthly payment would be nearly $300 less.
Click here to read NerdWallet’s study, including graphics and guidance for first-time buyers, in its entirety.
