July 5, 2022

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US home sales fall after record price increase

US home sales fall after record price increase

(CNN) – Home sales declined for the third consecutive month in April as higher mortgage interest rates and affordability issues drove many potential buyers out of the market. However, prices continued to rise, reaching all-time highs.

The median home price in April was $391,200, up 14.8% from a year ago, according to a report from the National Association of Realtors. Although price growth was strong, it was a slower annual pace of increase than in recent months, and determined buyers stretched their budgets to buy a home before the sale. Mortgage interest rates Go up more.

The price increase indicates more than a decade of consecutive annual increases, the longest streak ever.

Mortgage rates continue to rise in the United States 0:59

But with the average 30-year mortgage rate climbing to 5% in April, the rising cost of home financing has driven some potential buyers out of the market.

Existing home sales, which include single-family homes, duplexes, condominiums and co-ops, were down 2.4% from the previous month and 5.9% from a year ago. This represents the weakest sales activity since June 2020.

“Rising home prices and sharply higher mortgage rates have dampened buyer activity,” said Lawrence Yun, chief economist at NAR. “More declines appear imminent in the coming months, and we are likely to return to pre-pandemic home sales activity after the marked increase in the past two years.”

Affordability remains a challenge

Yoon said that while listings of homes available for sale declined in April, according to NAR’s tracker of deposit boxes, buyer demand remains strong. In April, a typical home sold in 17 days very quickly and 88% of homes sold in a month or less.

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“The number of families interested in owning a home remains high, although confidence has waned that now is the time to buy,” said Danielle Hill, chief economist at Realtor.com. “This is especially true among younger homebuyers, who are likely first-time buyers and are struggling to save up for a down payment as rents continue to break records.”

Affordability remains a challenge for first-time homebuyers, who made up just 28% of the market in April. A year ago, they represented 31% of the market.

But record rates and rising mortgage rates are not only making things difficult for buyers, the persistently low supply of homes available for purchase continues to weigh on sales.

Stock increases, but stays low

The inventory of homes for sale rose 10% in April compared to March, but was down 10.4% from a year ago, according to NAR.

“Housing supply is starting to improve, albeit at a very slow pace,” Yoon said.

Yun pointed out that the current housing market is in an unusual state. While rising home prices and falling days on the market indicate the strength of the housing market, he said, the dips in sales are a sign of weakness.

“Maybe we will move from an intense market where many homes receive multiple offers to a less dense market,” he said. “Transactions are still happening, and they happen quickly, if stock is available.”

Unfortunately, he said, there is a huge wave of potential inventory that has yet to be released.

Some homeowners considering selling may have changed their minds in part because they have been able to refinance their mortgage at a very low interest rate in the past two years. “They don’t want to give up on very low mortgage rates,” Yoon said.

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Although higher rates are expected to eventually dampen price increases, homeowners still hold most of the cards.

“Sellers will want to be aware of a market that adapts quickly and is poised for readjustment,” Hill said.