Will house prices start to become more affordable? That’s the question many potential buyers ask, and recent data from the National Association of Realtors (NAR) may shed some light on the matter. NAR reports that while the median existing home price rose to $416,000, the percentage increase was down from the previous year.
The NAR data also indicates that the number of homes sold has also fallen, indicating a drop in demand. In fact, starting in June, existing home sales have been falling for the past five months.
Mortgage demand at 22-year low
According to the Mortgage Bankers Association (MBA), mortgage applications fell 6.3% for the week ending July 15. “Mortgage applications fell for the third consecutive week, reaching the lowest level since 2000,” said Joel Kan, MBA associate vice president of economic and industrial forecasting.
“Buying activity has declined for conventional and government loans as the weakening economic outlook, high inflation and ongoing affordability issues impact buyer demand,” Kan added. “The decline in recent purchase orders aligns with slower residential construction activity due to reduced buyer traffic, continued shortages of building materials and rising costs.”
In addition, inflation increased by 9.1% over the past 12 months, according to the consumer price index, which was higher than expected. Since the start of the year, 30-year mortgage rates have fallen from 3.22% to 5.3%, according to data from Freddie Mac. That’s nearly a 65% increase. The combination of higher inflation and higher mortgage rates has dramatically increased costs, dampening demand.
Increase in supply
In addition to the decline in demand, the supply of housing has increased. Total housing inventory reached 1.26 million units at the end of June, according to a report by NAR. This is an increase of 9.6% over May and 2.4% over the previous year. The number of unsold homes is at a three-month supply, up from two and a half months in June 2021.
What potential buyers can do
With more homes on the market and falling demand, home prices are begins to stabilize. But with the high cost of homes and soaring mortgage rates this year, many people can afford less. This naturally discouraged potential buyers.
If you’re looking to buy a home, you might want to wait a little longer and save a bigger down payment. Or you can play around with our mortgage calculator to see what you can afford in different situations. And if you’re new to the world of home buying, check out our guide for first-time home buyers for tips on the process.
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