Photo Credits: Daily Sabah
Prices of homes in the United States have broken records this June. The amped-up prices of homes are in place despite the lowering sales of properties across the country.
Home sales have steadily decreased for the past five months because buyers cannot afford the increased prices.
The average price last month was up by $416,000. According to the National Association of Realtors, the figure is 13.4% higher than the price last year, marking the decades-long growth of home prices.
While the prices are increasing, sales have decreased. The purchase of homes like single-family homes, condominiums, co-ops, and townhomes are down by 5.4% last June. The month was also when sales were the weakest since 2020. This is understandable as the economy is suffering from the pandemic.
Lawrence Yun, the chief economist of the National Association of Realtors, said, “Falling housing affordability continues to take a toll on potential homebuyers. Both mortgage rates and home prices have risen too sharply in a short span of time.”
However, the end of June saw an increase in the inventory of homes – up by 9.6%.
“Finally, there are more homes on the market,” Yun added. “Homes priced right are selling very quickly, but homes priced too high are deterring prospective buyers.”
Affordability vs. Availability
The report by NAR showed that the median prices of Miami homes grew the largest, 40.1% from a year ago. Orlando followed with a 30.6% price gain within a year, then Nashville with the same percentage growth as Orlando.
Interestingly, areas that priced the highest were the areas that saw an increase in the number of homes with reduced prices. Austin had the highest number, then Phoenix, followed by Las Vegas.
The increase in the inventory of homes in many cities should cut some dollars on the prices; however, mortgage rates have surged, causing buyers to spend less. Chief economist at Realtor.com, Danielle Hale, said that both mortgage rates and inventory increases contribute to the rate of home sales, but it’s unsure which has a bigger impact.
“I expect affordability to be the bigger driver than availability moving forward,” Hale said.
“Home shoppers continue to leverage workplace flexibility in looking for ways to reduce their housing costs — enacting their own, personal inflation-fighting plans.”
“As mortgage rates and prices of other goods and services continue to climb, home shoppers are likely to become even more budget conscious. This is especially true if concerns about the strength of the job market — which has so far remained resilient – grow,” Hale added.
Swift Market amid constraints
Even with these factors, the purchasing market is still fast. When a property is posted on the market, it goes into a contract within just 14 days. Last year, the average was 17 days, while others reached 30 days.
“Whenever homes are listed, they are attracting buyers,” Yun explained.
According to Yun, buyers might be taking advantage of the locked-in interest rate, which explains why buyers take a shorter time to secure a property on the market.
“Mortgage rates have been trending higher,” he added. “Maybe buyers are trying to take advantage of a lower locked-in rate. That period is coming to an end quickly. They want to sign the contract and close the deal quickly.”
However, Yun explained that the swiftness of the market would only last for a short time. Even with the increasing trend of inventory, Yun further said that the shortage of housing would be clearer in the future. This is because of the lessened interest of builders in constructing single-family houses and leaning towards multifamily buildings.
“I don’t foresee any oversupply coming, even as sales retreat,” Yun concluded.