The dream of homeownership just had a little more cold water splashed on it.
Low supply, high prices, and the climbing costs of borrowing have created one of the tightest, least affordable US housing markets in decades.
Existing home sales in August fell to their lowest since the start of the year, according to new data from the National Association of Realtors. Plus, Zillow reported that the average rate for 30-year fixed mortgages — the most popular home loan — is near 7.2%, its highest since 2002, according to Freddie Mac data. And there’s no relief in sight — especially in the wake of the Federal Reserve’s plan to keep interest rates higher for longer to maintain its fight against inflation. But a standstill in the housing market is nobody’s definition of a “soft landing.”
Even some of the country’s biggest landlords can’t find houses to buy. Landlords with 1,000 properties or more accounted for 0.4% of US home purchases during the second quarter, well down from a peak of 2.4% in late 2021, The Wall Street Journal reported. If the country’s mega-landlords are having trouble, what hope do the rest of us have?
- The median home selling price sits at $407,100, slightly below the highest-ever level recorded by the NAR in June 2022, but still pretty pricey. “Supply needs to essentially double to moderate home price gains,” NAR chief economist Lawrence Yun said in a statement. “Mortgage rate changes will have a big impact over the short run, while job gains will have a steady, positive impact over the long run.”
- NAR counted just 1.1 million existing homes up for sale at the end of August, a 14% drop year-over-year. It would take just over three months to sell all the properties.
Back to Work: Return-to-work changes also have entered the mix of factors deciding housing prices. Many Americans face the tough decision of selling their homes, sometimes at a loss, and moving to where their employer wants them to be or finding new jobs. Market researcher Redfin reported that return-to-work policies are motivating 10% of US home sellers to relocate. One Idaho-based realtor told Redfin two of her clients had to choose between moving to Seattle or getting fired. “They’ll probably have to take a $100,000 loss on their home. Their new house in Seattle won’t be anything close to the size of their property in Boise, and their mortgage rate will be much higher.”