Photo Credits: Daily Sabah
In the United States, home prices broke records in June. Even though home sales nationwide are declining, the elevated home prices are still in place.
Because buyers cannot afford the higher prices, there has been a steady decline in home sales over the last five months.
Last month, there was a $416,000 increase in the average price. The National Association of Realtors reports that this amount represents a 13.4% increase over the price from the previous year, continuing the long trend of rising home prices.
Sales have fallen off as prices have gone up. Single-family homes, condos, co-ops, and townhome transactions all decreased by 5.4% in June. The month also saw the lowest sales since 2020. Given that the pandemic is hurting the economy, this is understandable.
National Association of Realtors chief economist Lawrence Yun, said, “Falling housing affordability continues to take a toll on potential homebuyers. Both mortgage rates and home prices have risen too sharply in a short span of time.”
The number of homes on the market rose by 9.6% at the end of June, though.
“Finally, there are more homes on the market,” Yun further said. “Homes priced right are selling very quickly, but homes priced too high are deterring prospective buyers.”
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Availability versus Affordability
According to the NAR report, Miami’s median home prices experienced the largest growth from a year ago, rising by 40.1%. After Nashville, which experienced a price increase of exactly 30.6% over the course of a year, came Orlando.
Strangely, the regions with the highest prices also saw a rise in the proportion of homes with lower prices. The highest number was in Austin, followed by Phoenix and Las Vegas.
Because of rising mortgage rates, buyers are being forced to spend less despite the fact that the supply of homes in many cities has increased. According to Realtor.com’s chief economist, Danielle Hale, inventory growth and mortgage rates both influence the pace of home sales, but it’s unclear which factor has a greater influence.
“I expect affordability to be the bigger driver than availability moving forward,” the chief economist said.
“Home shoppers continue to leverage workplace flexibility in looking for ways to reduce their housing costs — enacting their own, personal inflation-fighting plans. As mortgage rates and prices of other goods and services continue to climb, home shoppers are likely to become even more budget conscious. This is especially true if concerns about the strength of the job market — which has so far remained resilient – grow,” Hale further said.
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Fast market purchase average despite increase in prices
The purchasing market is still brisk even with these factors. A property enters into a contract within 14 days of being listed on the market. While some people experienced 30 days, the average was 17 days last year.
“Whenever homes are listed, they are attracting buyers,” Yun added.
The reason why buyers take less time to secure a property on the market, according to Yun, may be that they are taking advantage of the locked-in interest rate.
“Mortgage rates have been trending higher,” Yun said. “Maybe buyers are trying to take advantage of a lower locked-in rate. That period is coming to an end quickly. They want to sign the contract and close the deal quickly.”
Nevertheless, Yun emphasized that the market’s quickness would pass quickly. Yun added that despite the rising trend in inventory, it would become more obvious in the future that there would be a housing shortage. This is a result of builders’ dwindling enthusiasm for single-family home construction and their inclination toward multifamily structures.
“I don’t foresee any oversupply coming, even as sales retreat,” Yun finally said.