As you are no doubt aware, housing prices have skyrocketed during the pandemic.
The median sale price for existing homes hit $407,600 in May, up 14.8% from May 2021, according to the National Association of Realtors. This marks 123 consecutive months of year-over-year increases, the longest streak of NAR records.
Overall, home prices climbed 20.4% in the 12 months to April, according to the S&P CoreLogic Case-Shiller Index.
“We continue to see very strong housing market strength as the 20 cities [in a more narrow Case-Shiller index] recorded double-digit price increases,” Craig Lazzara, Managing Director of S&P DJI, said in a press release.
Mortgage rates are also soaring. The 30-year fixed mortgage rate averaged 5.81% as of June 23, hitting a nearly 14-year high, based on Freddie Mac. The rate fell from 5.78% on June 16. It was only 3.02% a year ago.
Add to that increases in prices and mortgage rates, and buying a home has become simply unaffordable for many Americans.
The national median mortgage payment totaled $1,897 in May, up $513, or 37%, since the start of the year, according to the Mortgage Bankers Association.
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This lack of affordability sends many potential buyers towards renting. A total of 74% of single-family home owners said in May they expected continued and sustained rental activity over the next six months, according to a survey by John Burns Real Estate Consulting, quoted by the Wall Street Journal.
Of course, the high demand for rentals also makes many of them unaffordable. Rents for single-family homes jumped a record 14% in the 12 months to April, according to CoreLogic. It’s the 13the consecutive month of all-time highs.
Accept housing inflation
For most of us, all of this means we have no choice but to pay more for our accommodation, unless you already own a home and are content to stay there.
In other recent housing news, pending home sales rose 0.7% in May from April, following six consecutive monthly declines. But sales fell 13.6% from May 2021, according to the National Association of Realtors.
“Despite the small gain in pending sales from the previous month, the housing market is clearly undergoing a transition,” NAR chief economist Lawrence Yun said in a statement. “Deal signings are down significantly from a year ago due to much higher mortgage rates.”
Mortgage rates have climbed as the Federal Reserve has raised its federal funds rate target by 150 basis points since March.
“Trying to balance the housing market by stifling demand through higher mortgage rates is detrimental to consumers and the economy,” Yun added. “The best way to balance the market is to increase supply, which also helps the wider economy.”