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What’s the Silver Lining for the Housing Market Cloud?

by WOOWinvest
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What’s the Silver Lining for the Housing Market Cloud?

Home prices skyrocketed and mortgage rates soared. Any good news for potential home buyers?

Believe it or not, the answer is yes. Home inventory is on the rise, with an annualized growth rate of 18.7% in June, according to realtor.com, a real estate services firm. This is a record with Realtor.com data going back to 2017. This is the second consecutive month of growth.

“This inventory turnaround is driven by sellers entering the market and slowing demand,” Realtor.com economists Sabrina Speianu and Danielle Hale wrote in commentary.

“New listings are entering the market at a higher rate (up 4.5 per cent year-on-year) than recently,” they said.

At the same time, “the slowdown in demand this month took a bigger toll, with pending listings down significantly compared to last year (down 16.3 per cent),” they said.

“Nevertheless, homes are still on the market for less time compared to last year and prices are still rising, in part due to an increase in large new listings and a slow adjustment in seller expectations.”

Bigger Homes: An ‘Opportunity’

These larger homes represent “opportunities for upgrade buyers, as new listings are on the larger side,” Hale said. “The first wave of improved supply may be especially appropriate for summer sellers looking to upgrade from their starter homes.”

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Looking ahead, “While we expect more inventory will eventually cool the fierce pace of competition, the typical buyer has yet to see meaningful relief from quick home sales and record-high asking prices,” Hale said.

According to the National Association of Realtors, the median existing-home sale price reached $407,600 in May, 14.8% higher than in May 2021. This marks the 123rd consecutive month of year-over-year growth.

Mortgage rates are also rising. The 30-year fixed mortgage rate averaged 5.81% as of June 23, hitting a near 14-year high, according to Freddie Mac.

family (un)affordability

Taken together, rising home prices and mortgage rates have made housing unaffordable for many Americans.

The median mortgage payment nationwide in May was $1,897, up $513, or 37%, from the beginning of the year, according to the Mortgage Bankers Association.

This lack of affordability has led many would-be home buyers to rent. A total of 74 percent of single-family homeowners in May said they expected rental activity to remain strong over the next six months, The Wall Street Journal cited a survey by John Burns Real Estate Consulting.

Of course, strong demand for rentals has also made it unaffordable for many. Single-family home rents surged a record 14% in the 12 months to April, according to CoreLogic. This is the 13th consecutive month of record highs.

For most of us, this all means we have no choice but to pay more for our housing unless you already own your home and are willing to stay there.

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