I’m Austin, CEO and co-founder of Pacaso. As the winter thaws and flowers begin to bloom, many wonder if the spring housing market is set to heat up. At Pacaso, 2023 is off to a strong start. We see early signs of buyers eager to make their second homeownership dreams a reality. However, with recent bank turmoil and ongoing macroeconomic uncertainty, this year's market may differ from traditional spring housing markets.Here are some spring trends on the horizon —and how Pacaso stacks up:
1. Buyers are springing back to the market
Several recent indicators point to growing buyer demand. One report from the National Association of REALTORS® shows that existing-home sales jumped 14.5% in February to a seasonally adjusted annual rate of 4.58 million, marking the largest monthly percentage increase since the peak pandemic in July 2020 (which saw a 22.4% increase).Pacaso: We're also seeing a spring in the step of second home buyers. In Q1 2023, Pacaso saw a 40% increase in funded shares compared to Q4 2022.
2. Home buyers are shopping as rates continue to fluctuate
Despite fluctuating mortgage rates, consumer interest is increasing. Mortgage-purchase applications increased 17% from February, increasing for the third straight week according to a Redfin report. Another indicator of interest is the Pending Home Sales Index (PHSI),* a forward-looking indicator of home sales based on contract signings. According to the National Association of REALTORS®, pending home sales also grew in February for the third consecutive month, increasing by 0.8% to 83.2 in February.These pending sales could be directly correlated with rates decreasing. On March 30, the average weekly rates dropped from 6.42% to 6.32%, according to Freddie Mac. Or perhaps buyers are becoming more used to the rates hovering above 6%.
3. Low inventory drives sight unseen sales
Despite buyers preparing to enter the market and take on record-high rates, inventory continues to be an obstacle for many home buyers. According to a Redfin report, new listings of U.S. homes fell by 22% in February compared to a year earlier during the four weeks ending March 19, a record low for this time of year. Bidding wars amongst home buyers are likely unavoidable during this spring due to this historic supply and demand imbalance.Pacaso: In Q1 2023, Pacaso sold out of 63% of its 2022 year end inventory balance, thanks to the innovative payment solution PacasoNow. This decline in inventory and acceleration of sales motivated buyers to purchase sight unseen. More than a third of Pacaso sales in March were booked sight unseen, marking the highest level since Jan 2022.
4. Home prices rise, and premier destinations remain stable
Many real estate experts forecast that home prices will be under pressure for the next year or two due to macro uncertainty and interest rates. However, the market is seeing an encouraging turn with strong home sales at the start of this year. February brought the strongest one-month gain since May 2022, with prices rising nationally by 0.16% according to Black Knight.Home prices will continue to vary greatly depending on the specific market's supply and demand levels. Pacaso focuses operations in markets where demand is projected to remain strong and home prices are expected to increase. For instance, Aspen's Pitkin County is experiencing a historic shortage of inventory, but demand remains high due to its location, world-class skiing and outdoor activities, and the growing trend of remote work. In such communities, primary and secondary homes tend to hold their value and even appreciate over time.Pacaso: We also have a thriving resale marketplace for our homeowners, with resales averaging 12% appreciation. This impressive figure showcases the value of Pacaso's unique co-ownership model and the potential for co-owners to benefit from the appreciation of their property.We'll continue to check in with updates, and encourage you to contact us with any questions about a market of interest.