With mortgage rates rising by two percentage points since the beginning of this year, the American home buying frenzy seems to have finally subsided.
“Home sales have basically returned to levels seen in 2019 – before the epidemic,” said Lawrence Yun, chief economist for the National Association of Realtors (NAR), who said the US real estate market over the past two years was a “gangbuster performance.”
However, this is not entirely 2019 again.
New data from NAR shows that the median existing home price for all residential types in May was $ 407,600, an increase of 14.8% from May 2021.
“This represents a year-over-year increase of 123 consecutive months, the longest series on record,” NAR said.
Prices according to region
According to NAR data, sales of previously existing homes fell 3.4% in May.
“Given housing affordability challenges from the sharp rise in mortgage rates this year, further sales declines in the coming months,” Yun said.
“Nevertheless, suitable-priced homes are selling quickly, and inventory levels still need to rise significantly – almost doubling – to cool the home price appreciation and provide more options for home buyers.”
The West tops all US regions with high median home prices of $ 633,800, 13.3% since May 2021.
The Northeast has the second-highest median home price of $ 409,700, representing a 6.7% rise from a year ago.
The average price in the South was $ 375,000, a jump of 20.6% from a year ago. For the ninth consecutive month compared to the other three regions, the South recorded the highest rate of price increases, NAR noted.
Meanwhile, the average price in the Midwest was $ 294,500, up 9.5% over a year.
No change in hardship sales
With the US already reporting negative GDP for Q1, coupled with 40-year high inflation, experts are warning of an impending recession, which could put a lot of financial pressure on homeowners trying to make mortgage payments.
Currently, NAR’s May data shows distressed sales – foreclosures and short sales – represent less than 1% of all sales. That remains unchanged from May 2021, the previous month and a year ago.
But there are slight changes elsewhere.
NAR’s data showed that first-time buyers fell behind sales by 27% in May, down from 28% in April and down 31% in May 2021.
“Declining home purchases means more people are renting, and the resulting rent price spike prompts more corporate investors to buy single-family homes and convert them into rental properties – putting additional financial pressure on prospective first-time home buyers,” NAR President Leslie Rowda-Smith said in a statement.
“To counter this trend, policymakers should consider promoting inventory releases to the market by temporarily lowering capital gains taxes for Mom and Pop investors to sell to first-time buyers.”
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