Home buyers could finally say no to sky-high prices
The housing market has been hard to break since the second half of 2020, when mortgage rates plunged to record lows and buyers sought to capitalize on it. At the same time, sellers haven’t rushed to list their homes since the pandemic began. And these days, the housing stock is considerably lower than it would be in a normal market.
Because housing inventory has been so limited, demand for homes has exceeded supply. This caused house prices to spike.
In April, the median selling price of an existing home rose to $391,200, up 14.8% from a year earlier, according to the National Association of Realtors (NAR). And that, combined with higher mortgage rates, could finally push buyers over the edge.
Buyers back off
Mortgage home purchase inquiries fell 14% in April from March, reports the Mortgage Bankers Association. Requests decreased by 10.6% compared to April 2021.
Given that the average 30-year mortgage rate is well over 5%, it’s no surprise buyers are less willing to borrow. But inflated home prices also play a role in this decision. And unfortunately, house prices will likely remain high until inventories rise significantly.
The NAR reports that at the end of April there was only a 2.2 month supply of homes on the market, when a normal housing market would offer a 4-6 month supply. . It is this glaring lack of inventory that makes it so difficult for buyers to buy homes and means that a large number of properties land in bidding wars.
Should Buyers Wait to Buy a Home?
At this point, it’s pretty clear that 2022 won’t be the best year to buy property. Admittedly, 2021 wasn’t exactly prime time for buying a home either, given that property values were also very high at the time. But at least last year buyers were able to benefit from low and competitive mortgage rates. Today’s rates make borrowing much less affordable and attractive.
Based on the general state of the housing market, it could be beneficial for buyers to wait until at least 2023. This gives inventories some time to build up, which could help bridge the gap. between existing supply and overwhelming demand.
Additionally, one of the main reasons sellers have been hesitant to list homes is that the pandemic has been a source of unrest since the start of 2020. At this point, the pandemic is still with us, but Americans are increasingly learning more to coexist with it. As this shift in mindset reaches more sellers, they may be more motivated to list their homes. And once inventories have risen enough, house prices could start to fall.
It’s premature to assume that housing stocks will return to normal levels by 2023. But at this point, it’s pretty clear that 2022 won’t be the year the housing market cools down.
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