Soaring mortgage rates and high house prices finally seem to be weighing on the housing market.
New home sales fell 16.6% in April from March, according to data released Tuesday by the US Census Bureau. Compared to a year ago, new home sales are down 26.9%.
Last April marked the fourth consecutive month of decline, and it recorded the lowest new home sales total since April 2020, when economic activity slumped at the start of the pandemic.
The median selling price of a new home was $450,600 in April, according to the Census Bureau, compared to $435,000 the previous month (a 3.6% increase) and $376,600 in April 2021 (a 3.6% increase). 19.6%). A perfect storm of factors, including an increase in demand over the past two years, inventory constraints, supply chain issues, rising construction costs and even remote working, are in the works. origin of these exorbitant prices.
“While new construction has gained favor with many potential buyers over the past couple of years due to the extreme shortage of existing homes for sale, the rising cost of a new home is now shutting many people out of the market” , Realtor.com Senior Economist George Ratiu wrote.
Sales of existing homes are also falling, but not as dramatically. Sales fell 2.4% on a monthly basis in April, according to the National Association of Realtors (NAR) – the third consecutive month of decline.
And it’s not just house prices that are rising. Mortgage rates crossed the 5% threshold this spring, pushing up a monthly home payment with the median asking price for all homes at $2,447 in the four weeks ending May 15, according to data from Redfin. This monthly payment is 43% higher than the comparable figure for the same period last year.
For hopeful buyers, especially those entering the market for the first time, homes are simply becoming less and less affordable. It should come as no surprise, then, that a majority of Americans think now is a bad time to buy a home.
The housing market and a possible recession
The drop in the number of homes sold has some experts talking about a slowdown in the economy more broadly. Robert Dietz, chief economist for the National Association of Home Builders, described April’s data as a “clear recession warning.” Others see the drop in home sales as a sign that things are getting back to normal after two years of extraordinary activity.
“It looks like more declines are imminent in the coming months,” NAR chief economist Lawrence Yun said last week, “and we will likely return to pre-pandemic home sales activity. “.
But don’t expect this shift to happen overnight, even as more sellers lower their asking prices and more buyers decide to stay away. At the same time, low inventory levels continue to create a very competitive market and homes are still selling quickly to buyers who can afford to pay cash or borrow at today’s rates.
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