Housing affordability has become a key concern in the real estate market, amid rising mortgage rates and double-digit annual house appreciation. The average monthly payment is 50% higher than a year ago. Those rising costs are sidelining more aspiring home buyers.
Signs are surfacing that the housing market could be slowing, and that could put less pressure on home prices. For the fourth consecutive month, sales of new homes dropped, reaching their lowest level since the pandemic. Existing-home sales also decreased in April, falling for the third consecutive month and down nearly 6% compared to a year ago, according to National Association of REALTORS® data.
The latest housing data and surveys could “offer hope” for home sellers and buyers, George Ratiu, senior economist and manager of economic research at realtor.com® said in a recent report. The drop in sales could offer less competition to buyers who are eager to jump in but keep getting beat out.
Also, Ratiu says sellers and buyers could be helped by the rise of remote work. “Many move-up buyers are leveraging newfound flexibility (from remote work) to employ creative strategies, such as relocating to an area offering homes that meet their family’s needs without breaking their budgets,” he says.
The median sales price nationwide rose to $450,600 in April—the highest level on record.
“While sellers stand to cash out record-high equity upon closing on their home, they are also facing higher prices and interest rates on their next home,” the report cautions.
Lawrence Yun, NAR’s chief economist, says there are scenarios in which the market soon improves for buyers. “If mortgage rates stabilize roughly at the current level of 5.3% and job gains continue, home sales could stabilize in the coming months,” Yun said in a statement about the latest pending home sales data. “Home sales in 2022 are expected to be down about 9%, and if mortgage rates climb to 6%, then the sales activity could fall by 15%.”