Home prices are now higher than ever. What’s important for buyers and sellers to know?
Housing prices hit all-time highs in June as existing-home sales continued to drop, according to new housing market data released July 20.
The median existing-home sale price reached $416,000 in June, up 13.4% from this time last year. June’s increase marks the 124th consecutive month that prices have risen, which is the longest streak on record, according to the National Association of Realtors .
And while prices have been climbing, sales have been declining.
Existing-home sales fell for the fifth month in a row in June, dropping 5.4% from May and 14.2% from June 2021, the NAR data shows.
“Falling housing affordability continues to take a toll on potential home buyers,” Lawrence Yun, NAR’s chief economist, said in a news release. “Both mortgage rates and home prices have risen too sharply in a short span of time.”
As sales continue to trend downward, the supply of houses is finally starting to catch up. Housing inventory increased 9.6% during June, continuing the upward trend since supply hit record lows at the start of the year.
What does the changing landscape of the housing market mean for consumers?
What buyers need to know
First, the bad news: Prices for everything, including housing, are rising, so buyers should prepare to see higher home prices and mortgage rates stick around.
“If consumer price inflation continues to rise, then mortgage rates will move higher,” Yun said. “Rates will stabilize only when signs of peak inflation appear. If inflation is contained, then mortgage rates may even decline somewhat.”
Mortgage rates, which peaked at nearly 6% in June, have forced many buyers out of the market. Although rates are trending downward, they remain high and may resume their upward tick if the Federal Reserve opts to raise interest rates again.
This could be good news for some buyers. Those who can afford a higher mortgage rate might have a better chance at getting a contract as compared to previous months when competition was stronger, according to Jessica Lautz, NAR’s vice president of demographics and behavioral insights.
“Because there’s a small pool of homebuyers, it means that the competition that buyers have faced over the last two years is suddenly reduced because a lot of buyers have been pushed to the side if they can’t afford to purchase a home,” Lautz told McClatchy News.
And, although mortgage rates are high, buyers might be better off purchasing a home now in anticipation of rates rising even more — especially if they are on a timeline, Danielle Hale, chief economist at Realtor.com, said.
“The longer you wait, you may see more options; you will see price growth slow, but that’s not the same thing as homes getting cheaper,” Hale told McClatchy News. “If you take longer to find a home, it does increase the likelihood of a higher mortgage payment which is certainly going to offset any potential savings.”
One way for buyers to save money: choosing a cheaper place to live — especially if you work from home.
While June’s national median home price was above $400,000, the median price in the South was $374,900 and the median price in the Midwest was even lower at $306, 900, NAR’s data shows.
Conversely, the cities with the largest median price increase over the last year were Miami, Orlando and Nashville.
“Buyers can look for affordability now and move to find it,” Hale said. “It’s like their own personal inflation fighting plan. There’s not much that you can control about prices, but you can control where you live and in that way kind of control how much you’re paying for housing.”
What sellers need to know
Although home sales are falling, sellers still have the upper hand in the housing market.
The supply of homes for sale is rising, but the market is still off balance, with a greater demand than supply. While sellers may not have as many offers as they would have had at the peak of the seller’s market, there is still almost always going to be “a buyer in the pipeline,” Lautz said.
“Homes priced right are selling very quickly, but homes priced too high are deterring prospective buyers,” Yun said.
Moving forward, the market is going to look comparatively worse for sellers as it starts to normalize and balance out. But worse does not mean bad, according to Hale.
“If you’ve been thinking about selling I don’t think you’ve totally missed an opportunity,” Hale said. “But I do think that buyers are grappling with pressures they haven’t before because mortgage rates are so high, so you want to keep that in mind as a seller. You don’t want to price ahead of what buyers are willing and able to pay for your home.”
Now more than ever, the most important thing Hale says buyers and sellers can do is stay in the know.
“The housing market is going through a big change right now. I think the key takeaway for all buyers and sellers is that you want to stay on top of what’s happening because it’s changing rapidly.”
This story was originally published July 20, 2022 at 5:09 PM with the headline "Home prices are now higher than ever. What’s important for buyers and sellers to know?."
