Thomvest Ventures Research's 2023 Housing Market Health Check analyzes shifting dynamics impacting supply, demand, affordability, mortgage activity and loan performance. Key takeaways: plunging affordability threatening homebuyers, construction lagging enduring demand, forecasted sales rebound after significant 2023 declines, and delinquencies remaining near historic lows despite uncertainty. The report offers insight into the market's sharp cooldown while providing an optimistic long view.
1. 2023 U.S. Housing Market Health Check
Key economic indicators in America’s residential real estate market
Thomvest Ventures Research
December 2023
Prepared by Nima Wedlake
2. I. Housing Supply, Demand & Affordability
Thomvest Ventures Research 2023 Housing Market Health Check
3. Case-Shiller U.S. National Home Price Index, 1990-2023
Source: S&P Dow Jones Indices LLC
50
100
150
200
250
300
350
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023
184.6
July ’06
19% CAGR
12% CAGR
311.5
Aug ’23
The National Home
Price Index has far
exceeded pre-Great
Recession levels
- The Shiller Index continues to rise in
2023 despite decades-high mortgage
interest rates; between 2019 and 2023
the Shiller Index is up 50%+.
- Despite rising interest rates, existing-
home sales prices grew in nearly every
measured metro area in 2023. Compared
to a year ago, the national median single-
family existing-home price rose about
3.5%.
Great Recession, 2007—2009
COVID-19 Pandemic, Q2 2020—2022
Thomvest Ventures Research
AFFORDABILITY
4. 1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
1
9
9
1
1
9
9
3
1
9
9
5
1
9
9
7
1
9
9
9
2
0
0
1
2
0
0
3
2
0
0
5
2
0
0
7
2
0
0
9
2
0
1
1
2
0
1
3
2
0
1
5
2
0
1
7
2
0
1
9
2
0
2
1
2
0
2
3
7.6% in Nov 2023
6.6% in June 2007
2.7% in Dec 2020
Mortgages rates have
swung meaningfully
upwards in 2023,
reaching nearly 8%
- This rise in interest rates has impacted
home affordability and transaction
volume in 2023.
- For context, every 100 basis point
increase in mortgage interest rate
decrease “buying power” by
~
15%
—
meaning prospective buyers can no
longer afford to purchase more
expensive homes.
- Rates appear to have peaked in
November 2023 and are beginning to
decline as the Fed signals a potential
transition to rate cuts in 2024.
Average Rate for Conforming 30-Year Fixed Rate Mortgage, 1991-2023
Source: Freddie Mac
Thomvest Ventures Research
Great Recession, 2007—2009
COVID-19 Pandemic, Q2 2020—2022
AFFORDABILITY
5. Housing affordability
has plummeted in 2023,
driven by rising
mortgage rates
- While home prices have increased,
mortgage costs as a percentage of
household income actually declined
relative to Great Recession levels.
- Mortgage costs relative to median
income dropped below 15% in 2020,
driven by declining mortgage rates, but
have since nearly doubled to 28.5%.
- Since then, housing affordability has
plummeted to its lowest point in at least
15 years, with many of the country’s most
affordable cities pulled into the crisis.
15%
20%
25%
30%
Q
3
1
9
9
0
Q
3
1
9
9
2
Q
3
1
9
9
4
Q
3
1
9
9
6
Q
3
1
9
9
8
Q
3
2
0
0
0
Q
3
2
0
0
2
Q
3
2
0
0
4
Q
3
2
0
0
6
Q
3
2
0
0
8
Q
3
2
0
1
0
Q
3
2
0
1
2
Q
3
2
0
1
4
Q
3
2
0
1
6
Q
3
2
0
1
8
Q
3
2
0
2
0
Q
3
2
0
2
2
Q
3
2
0
2
3
23.9% in Q3 2006
14.8% in Q4 2020
28.5% in Q3 2023
Source: National Association of Realtors
Thomvest Ventures Research
U.S. Mortgage Affordability, 1990-2023 (Median Mortgage Payment as a % of Median Income)
Great Recession, 2007—2009
COVID-19 Pandemic, Q2 2020—2022
AFFORDABILITY
6. Median Home Values & Appreciation by Market, 2019-2023 (In Thousands USD)
Source: Zillow Home Value Index
Home values across
every major U.S. city are
up meaningfully since
2019
- Home values across the U.S. are up a
staggering 49% between January 2019
and November 2023.
- Some markets have experienced even
more pronounced growth, including
Phoenix, AZ (up 64%), Miami, FL (up
64%) and Charlotte, NC (up 65%).
- Rising mortgage interest rates have
tapered home price appreciation across
most markets in 2023; cities like Austin,
TX and Boise, ID are experiencing
declining home prices (down 9.2% and
4.3%, respectively, in 2023).
Thomvest Ventures Research
AFFORDABILITY
$300
$400
$500
$600
Phoenix, AZ
2020 2021 2022 2023
+14.7% +29.4% +6.1% -2.9%
2020 2021 2022 2023
+12.4% +35.3% +4.3% -9.2%
Austin, TX
2020 2021 2022 2023
+7.7% +20.0% +14.1% -1.5%
Charlotte, NC
2020 2021 2022 2023
+11.8% +22.4% +12.8% +1.1%
$300
$400
$500
$600
Boise, ID
2020 2021 2022 2023
+20.0% +32.5% -2.5% -4.3%
Miami, FL
2020 2021 2022 2023
+7.4% +18.1% +19.4% +5.9%
Las Vegas, NV
2020 2021 2022 2023
+6.0% +22.9% +9.5% -3.2%
Denver, CO
2020 2021 2022 2023
+8.6% +17.2% +6.4% -0.7%
Dallas, TX
$448K $455K
$366K $369K
$453K $473K
$567K
$300
$400
$500
$600
Atlanta, GA
2020 2021 2022 2023
+9.9% +22.1% +13.0% +1.7%
Nashville, TN
2020 2021 2022 2023
+8.5% +21.2% +13.0% -1.1%
Washington, DC
2020 2021 2022 2023
+8.3% +9.0% +4.5% +3.0%
Chicago, IL
2020 2021 2022 2023
+6.0% +10.0% +6.1% +5.1%
$372K
$429K
$405K
$540K
$303K
7. Pittsburgh, PA
Cleveland, OH
St. Louis, MO
Cincinnati, OH
Oklahoma City, OK
Louisville, KY
Minneapolis, MN
Kansas City, MO
Hartford, CT
Columbus, OH
Indianapolis, IN
Chicago, IL
Baltimore, MD
New Orleans, LA
Virginia Beach, VA
Detroit, MI
Memphis, TN
Dallas, TX
Houston, TX
Richmond, VA
Atlanta, GA
San Antonio, TX
25% 50% 75% 100% 125% 150% 175%
Source: National Association of Realtors
Thomvest Ventures Research
Ratio of Area Median Income to Income Requirement for Median Home — Top 50 MSAs
Affordability challenges
have impacted many
regions in the U.S. as
wages growth lags HPA
- 43% of MSAs across the U.S. are
considered unaffordable to median
households within the MSA.
- For example, the median income in the
Pittsburgh, PA metropolitan area is
$101,900 and the income required to
purchase a median-priced home is
$82,600
—
implying that typical
households in this MSA can still afford
homes.
- Conversely, the median income in the
San Jose, CA metropolitan area is
$178,800, but the income required to
purchase a median-priced home is
$482,000
—
implying a severe
affordability crisis in the MSA.
- This analysis factors in the median
price of homes across each MSA as
well as prevailing mortgage rates to
determine minimum income needed to
purchase a home.
Charlotte, NC
Jacksonville, FL
Providence, RI
Philadelphia, PA
Tampa, FL
Phoenix, AZ
Sacramento, CA
Seattle, WA
Orlando, FL
Portland, WA
Salt Lake City, UT
Denver, CO
Boston, MA
Las Vegas, NV
Riverside, CA
New York, NY
San Francisco, CA
Miami, FL
San Diego, CA
Los Angeles, CA
Orange County, CA
San Jose, CA
25% 50% 75% 100%
Most Affordable MSAs Least Affordable MSAs
Median income
households can
afford a median-
priced home.
Median income
households can not
afford a median-
priced home.
AFFORDABILITY
9. 4M
5M
6M
7M
8M
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
6.6M Run-Rate Jan 2021
3.8M Run-Rate Oct 2023
Source: National Association of Realtors
Thomvest Ventures Research
U.S. Existing Home Sales Run-Rate, 2000-2023 (Annualized Sales by Month)
Home sales have fallen
rapidly in 2023 in
response to rising
mortgage rates
- The crux of the issue is that there are
still not enough homes available for
sale, as many homeowners are
reluctant to sell (driven by the
mortgage lock-in effect).
- New supply continues to lag demand,
with the gap between single-family
home constructions and the number of
households formed growing to 6.5
million homes in 2022, according to
Realtor.com.
- NAR predicts 4.71 million existing-
home sales in 2024, up 13.5% from 4.1
million anticipated home sales in 2023.
SUPPLY
Great Recession, 2007—2009
COVID-19 Pandemic, Q2 2020—2022
10. 500
1,000
1,500
2,000
2,500
1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023
New construction starts
have yet to recover
following the Great
Recession
- Lack of new housing supply is a major
contributor to home price appreciation
— housing completions have trailed
household growth in every year since
following the Great Recession.
- 12.3 million U.S. households were formed
from January 2012 to June 2021; however,
just 7 million new single-family homes
were built during that time.
- Construction starts accelerated during
the pandemic in response to record
housing demand; however starts in 2023
are projected to decline slightly, due in
part to rising construction costs and
interest rates.
1.26M
Average Annual Starts
2013-2023
1.79M
Average Annual Starts
2000-2006
Annual U.S. Housing Construction Starts, 1980-2023 (In Thousands of Units)
Source: Federal Reserve Bank of St. Louis
Thomvest Ventures Research
2.1M
2005
SUPPLY
1.4M
2023
11. II. U.S. Mortgage Activity
Thomvest Ventures Research 2023 Housing Market Health Check
12. 150
200
250
300
350
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2023 2022 2021 2020 2019 2018 2017
MORTGAGE ACTIVITY
Mortgage purchase
applications are down
meaningful in 2023,
driven by rising rates
- The MBA Purchase Index includes all
mortgages applications for the
purchase of a single-family home. It
covers the entire market, both
conventional and government loans,
and all products.
- The index tracks the number of
mortgage applications for the
purchase of a home — which fell below
150 in 2023, a multi-decade low.
Monthly U.S. Purchase Mortgage Index by Year, 2017-2023
Source: Mortgage Bankers Association
Thomvest Ventures Research
2023
2022
2021
2020
2018
2019
2017
15. Credit availability has
continued to decline in
2023, indicating tighter
lending standards
- The Mortgage Credit Availability Index
is calculated using several factors
related to borrower eligibility (credit
score, loan type, loan-to-value ratio,
etc.).
- Credit availability spiked prior to the
Great Recession, and declined sharply
due to regulatory changes, as well as
updates to bank underwriting policies.
- The Credit Availability Index dropped
sharply in March 2020, as a result of
tightening credit standards during the
COVID
-
19 pandemic.
- The Index has tightened even further
in 2023 as GSEs have pulled back from
the mortgage markets.
MORTGAGE ACCESS
200
400
600
800
1000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
98.2 in Oct. 2023
Peak of 868.7 in June 2006
Mortgage Credit Availability Index, 2004-2023
Source: Mortgage Bankers Association
Thomvest Ventures Research
Great Recession, 2007—2009
COVID-19 Pandemic, Q2 2020—2022
16. MORTGAGE ACTIVITY
Mortgage originations
declined meaningfully in
2023, but are forecasted
to rise in 2024 and 2025
- In 2024, Fannie Mae forecasts modest
growth in purchase and refinance
originations, driven by declining
interest rates and an increase in for
sale housing supply.
- “Single-family home sales likely
bottomed out in Q4 2023 and, due to
the recent pullback in mortgage rates,
are expected to begin a slow but
meaningful recovery over the course of
the next year, alongside upward-
trending mortgage origination activity”,
according to commentary from the
Fannie Mae Economic and Strategic
Research
(
ESR
)
Group.
- Purchase origination volume is
expected to increase 12.7% in 2024
and 12.8% in 2025.
Mortgage Origination Volume by Year — Purchase & Re
fi
nance Volume
Source: Fannie Mae December 2023 Forecast
Thomvest Ventures Research
$1.0T
$2.0T
$3.0T
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Purchase Origination
$1.0T
$2.0T
$3.0T
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Re
fi
nance Origination
$1.28T
$1.44T
$1.62T
$252B
$451B
$686B
-22.2% +12.7% +12.8%
-65.5% +79.0% +52.1%
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