The American dream of homeownership is becoming increasingly elusive for many as the U.S. housing market reaches new heights.
Recent data from Redfin shows the median home sale price hit a record $397,954 in June, jumping nearly 5% from last year.
This marks the biggest annual increase since March, putting further pressure on would-be homebuyers.
With mortgage rates hovering around 6.86% for a 30-year loan, the monthly payment for a median-priced home now stands at $2,749.
That’s just shy of the all-time high set in April, offering little relief to those looking to enter the market.
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“Affordability is the biggest hurdle in today’s housing market,” says Lisa Sturtevant, chief economist at Bright MLS. “More buyers are getting priced out across the U.S., even as inventory slowly increases. We might see a slower summer for home sales as some buyers wait for rates to potentially drop later in the year.”
BEWARE: Buying conditions in the US housing market has collapsed
Reaching levels only seen 2 times since 1960:
– 1974
– 1981Both instances ended in a recession
The housing market is a key leading indicator of the business cycle
And it tends to react very quickly to interest… pic.twitter.com/ACn9UjBZ5b
— Game of Trades (@GameofTrades_) July 5, 2024
Several factors are driving this affordability crisis:
1. Years of underbuilding have led to a housing shortage.
2. Rising mortgage rates have cooled the market but increased costs for buyers.
3. High construction material prices have slowed new home production.
4. The “golden handcuff” effect: Homeowners with ultra-low pandemic-era mortgage rates are reluctant to sell, further limiting supply.
Economists expect mortgage rates to stay high for most of 2024, with relief only coming when the Federal Reserve starts cutting rates.
Even then, don’t expect a return to pandemic-era lows. Market watchers predict just one or two rate cuts this year.
These two charts explain pretty much everything about the US housing market… @DomWh1te created the left chart showing the relative mortgage cost for new and existing home owners… and this has resulted in the imbalanced inventory. Probably not a stable long-run equilibrium! pic.twitter.com/vNMYshS8MY
— Ian Harnett (@IanRHarnett) July 7, 2024
The supply crunch is equally concerning.
Realtor.com reports available home supply is down 34.3% compared to pre-pandemic levels.
A Zillow survey found that most homeowners are twice as likely to sell if their mortgage rate is 5% or higher.
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However, about 80% of current mortgage holders have rates below 5%, keeping many potential sellers on the sidelines.
