There’s no question that most people agree that the current US housing market is just too hot.
In the last two years alone, home prices have skyrocketed by well over 30 percent, hitting an average price of $391,200 in April, according to data released by the National Association of Realtors (NAR).
However – perhaps much to the delight of price-conscious first-time homebuyers – the market finally seems to be cooling off.
As reported by CNBC, NAR data indicates that April home sales fell nearly 6 percent year-on-year to the lowest level since the start of the Covid-19 pandemic more than two years ago. Fast-rising 30-year fixed-rate mortgage rates, which have risen to 5.35 percent, are likely to weigh on the market even more, according to Mortgage News Daily. For comparison, that rate was 3.66 percent in early February.
“We’re returning to pre-pandemic selling activity, but I expect further declines,” Lawrence Yun, NAR’s chief economist, told the business news outlet.
In addition, according to Reuters, a new Commerce Department report showed that US future housing permits fell to a five-month low in April.
“Housing appears to be in transition, with the sector caught between soaring mortgage rates and declining affordability and supply chain constraints that continue to drive project backlogs up,” Conrad DeQuadros, senior economics advisor at Brean Capital in New York , said the news agency.
Despite these market conditions, home sales continued to close quickly, with the average home remaining on the market for only seventeen days. Cash sales accounted for 25 percent of all transactions, while investors accounted for 17 percent of sales and first-time buyers accounted for 28 percent.
“The number of households interested in becoming homeowners remains high, despite fading confidence that now is a good time to buy. This is especially true for younger homebuyers, who are likely first-time buyers and are struggling to save for a down payment as rents continue to hit records,” Danielle Hale, chief economist at Realtor.com, said in a statement.
“At the same time, seller expectations for higher down payments appear to be increasing, fueled by a still-competitive housing market and repeat buyers with relatively more equity at their disposal,” she continued.
Meanwhile, Zillow’s outlook for the housing market now calls for a gradual slowdown in annual home value growth from the current 20.9 percent to 11.6 percent by April 2023, down from a 14.9 percent forecast in March.
Over the next three months, Zillow expects home values to rise 5.2 percent, down from a 5.5 percent expectation in last month’s forecast.
Ethen Kim Lieser is a Washington-based financial and technical writer who has held positions at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him LinkedIn.