This June, the cost of housing in the US broke all previous records. In spite of declining real estate sales across the nation, the elevated home prices are still in place.
Because buyers cannot afford the higher prices, home sales have been declining steadily for the past five months.
There was a $416,000 increase in the average price last month. The National Association of Realtors recently reported that the amount is 13.4% higher than the price from the previous year, indicating a continuing rise in home prices over the past several decades.
Sales have decreased even though prices are rising. Single-family homes, condos, co-ops, and townhomes were all less frequently purchased in June than they were the previous month. Sales also had their weakest month since 2020 during that month. Due to the pandemic’s negative economic effects, this is understandable.
“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,” National Association of Realtors chief economist Lawrence Yun said.
In contrast, the number of homes on the market rose by 9.6% at the end of June.
“Finally, there are more homes on the market,” added Yun. “Homes priced right are selling very quickly, but homes priced too high are deterring prospective buyers.”
Inventory and mortgage rates affect consumer behavior
The median price of a home in Miami increased by 40.1% from a year ago, according to the NAR report. Nashville experienced a price increase of the same proportion as Orlando, 30.6%, in the following year.
Curiously, areas with the highest prices also saw a rise in the number of homes with lower prices. Austin, Phoenix, and Las Vegas were the three cities with the highest number.
Although the number of homes for sale has increased in many cities, prices should be lower, but instead, consumers are spending less because of rising mortgage rates. Increasing inventory and mortgage rates both influence the tempo of home sales, according to Realtor.com’s chief economist Danielle Hale, but it’s unclear which factor has a greater influence.
“I expect affordability to be the bigger driver than availability moving forward,” Hale added.
“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,” the chief economist further added.
The market is brisk even with price increase
The buying market is still fast paced even with these influences. In just 14 days after being listed for sale, a property enters into a contract. While some people experienced 30 days, the average duration last year was only 17 days.
“Whenever homes are listed, they are attracting buyers,” Yun stated.
Buyers may be taking advantage of the locked-in interest rate, which, in Yun’s opinion, explains why it takes them less time to secure a property on the market.
“Mortgage rates have been trending higher,” added Yun. “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.”
The market’s quickness, according to Yun, would, however, only last a brief period of time. Yun further stated that despite the rising trend in inventory, the housing shortage would become more evident in the future. Building single-family homes has become less popular as builders turn their attention to multifamily structures.
“I don’t foresee any oversupply coming, even as sales retreat,” concluded Yun.