The high mortgage rates seen over the last year were supposed to give weary home buyers at least one potential silver lining. If the high monthly costs of home ownership dampened demand for homes, then list prices might fall off to levels that could make more homes affordable.
But recent data on the U.S. housing market suggests things aren’t playing out this way.
Over the last week, the number of homes for sale in the U.S. fell below the previous year’s total for the first time in 59 weeks, CNBC reported. New listings in the last week of June were down 29% from the same week a year ago.
What’s more, Redfin reported that the typical U.S. home is selling for just $4,000 less than last year’s all-time high. The median price is now $383,000. The drop from last year is the smallest recorded in the last four months.
The steadiness of prices is driven by fewer people listing their homes for sale, since the 30-year fixed mortgage rate is still in the neighborhood of 7%. Many homeowners who might otherwise sell purchased their properties when mortgage rates were in the range of 3-4% during the pandemic. Other home owners refinanced at these low rates, removing the incentive to sell since they would have to pay at the higher rate in a new home.
Home prices peaked last June after rising more than 45% above pre-pandemic levels, but despite the higher mortgage rates, the lack of supply has kept prices relatively stable since they bottomed out in January.
The National Association of Realtors reported this week that demand for homes remains strong, even though pending home sales shrunk 2.7% in May from the previous month.
“Despite sluggish pending contract signings, the housing market is resilient with approximately three offers for each listing,” NAR Chief Economist Lawrence Yun said. “The lack of housing inventory continues to prevent housing demand from being fully realized.”
Sales of new homes increased 12% from April to May, but the pace at which builders can complete these properties is not enough to offset the slump in existing homes for sale.
“It is encouraging that homebuilders have ramped up production, but the supply from new construction takes time and remains insufficient,” Yun said.
During a typically busy time of year for home sales, the current outlook for home hunters is likely to be more of the same. Prices will remain high and monthly costs will continue to be a deterrent to many buyers as long as mortgage rates remain in their current range at these prices.
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