In a recent report released by the National Association of Realtors, it was revealed that homes in America are the most expensive they’ve ever been. The median price of a previously owned US home climbed for the eleventh consecutive month in May, reaching a record high of $419,300.
NAR’s chief economist, Lawrence Yun, noted that the rising home prices are widening the gap between property owners and first-time buyers. Despite the challenges, Yun believes that first-time buyers understand the long-term benefits of homeownership.
Housing affordability remains a concern, with high home prices and mortgage rates posing significant barriers for potential buyers. The Federal Reserve is expected to start reducing interest rates later this year, which could help lower mortgage rates. However, economists predict that average mortgage rates will not fall below 6% in 2024.
Research from Zillow shows that a median-income household would need to save over $127,000 for a down payment on the typical US home, making homeownership unattainable for many Americans. Despite these challenges, sales of previously owned homes in the US have seen a slight increase from their fall lows, reaching a seasonally adjusted annual rate of 4.11 million in May.
Supply shortage has been a long-standing issue in the US housing market, contributing to price hikes. However, there has been some progress in increasing inventory, with total housing units rising by 6.7% from April and 18.5% from the previous year.
While homeowners who secured low mortgage rates before the Fed’s rate hikes are hesitant to sell their homes, recent growth in inventory may indicate a shift as homeowners face life events like marriage, divorce, or new children. New home construction is a key factor in boosting housing supply, but high interest rates have slowed down homebuilding. Housing starts dropped to their lowest level since 2020 in May, signaling a slowdown in construction activity.
The housing market remains dynamic and will continue to evolve. Stay tuned for updates on this developing story.
