(Source: Bloomberg) The US housing industry continued to face challenges in May from high mortgage rates and costs for new homes.
According to official data issued on Wednesday, sales of new single-family homes fell 11.3% to a 619,000 annual pace in month, the lowest level since November. The number represented drops in all four major US regions and was below nearly all predictions in a Bloomberg survey of experts.
The sales rate is currently at the lower end of the range observed in the previous year, indicating a lack of affordability combined with limited momentum. For the first time since late March, mortgage rates fell below 7% in the middle of June, although they are still more than twice as high as they were at the end of 2021.
Although many purchasers have been put off by high pricing, a boom in supplies is making the product more affordable overall. In May of last year, the median transaction price of a new house dropped by 0.9% to $417,400. Concurrently, the number of available dwellings rose to 481,000, marking a continued record high since 2008.
According to Rob Barber, CEO of real estate analytics company ATTOM, “supplies of homes for sale generally rise during the peak summertime buying season, largely because it’s the most popular time for families to be out looking for new places to live before their children return to school.” “Since home seekers are more in demand during the summer, home prices also tend to rise most during that time.”
Higher demand makes the already difficult real estate market even more difficult, according to Dennis Shirshikov, an adjunct economics professor at City University of New York. “Housing supply tends to tighten, leading to increased competition among buyers,” he adds.
Nonetheless, some people think that Q3 of 2024 might not follow the pattern. Among them is Rick Sharga, the CEO and president of CJ Patrick Company: He claims that seasonal trends haven’t stayed true since the COVID-19 pandemic. We’ve seen home sales peak in January or February and then fall every month for the remainder of the year, Sharga says, “whereas historically, home sales have risen in the second and third quarters before declining in the winter months.” “In 2024, the sales volume seems to have peaked in February, and the same pattern seems to be emerging.”
The current situation of real estate trends means that prospective buyers face significant financial obstacles due to record-high property prices and high mortgage rates.
According to CoreLogic data, prices are predicted to rise by 1.5% from the previous quarter and by 5.9% from a year ago this quarter, according to Boesel. “Houses should continue to sell quickly, but sales should only be up 5% in the third quarter compared to a year earlier because inventories are still low.”
Remember to think about your next relocation and related fees if you want to sell shortly. Rossman says that “while it would be nice to sell your current home for a lot more than you paid for it, the price of whatever you are going to buy next has probably gone up a lot too.” In an ideal world, you would have to make financial sacrifices or move to a less costly part of the country. But bear in mind that if you want to stay in the same neighborhood but trade up to a more expensive property with a higher mortgage rate, the payments will be more difficult to make.