Economists say that recent signs of a slowdown in the housing market could result in long-awaited openings for new buyers to get in on the action.
Home affordability has become a major concern amid double-digital home price appreciation and rising mortgage rates. Compared to last year, the average monthly mortgage payment is now 50% higher. These rising costs are deterring an increasing number of aspiring home buyers.
For them, recent signs of a slowing housing market could offer some welcome relief. For the fourth straight month, sales of new homes have fallen, according to data from the National Association of Realtors. They’re now at their lowest level since the start of the COVID-19 pandemic. Meanwhile, existing home sales have also declined over the past three months and are now down 6% from the same month last year.
Realtor.com’s senior economist George Ratiu told MarketWatch the latest data may “offer hope” for buyers. He said the drop in sales could mean there is less competition for buyers who keep getting offers rejected.
In addition, Ratiu said buyers and sellers are being helped by the remote work trend. ““Many move-up buyers are leveraging newfound flexibility (from remote work) to employ creative strategies, such as relocating to an area offering homes that meet their family’s needs without breaking their budgets,” he explained.
Home prices are still a concern though. In April, the median sales price in the U.S. jumped to $450,600, the highest level on record.
“While sellers stand to cash out record-high equity upon closing on their home, they are also facing higher prices and interest rates on their next home,” realtor.com’s report warned.
Lawrence Yun, the NAR’s chief economist, said recently he believes there are scenarios in which the market could soon improve for buyers.
“If mortgage rates stabilize roughly at the current level of 5.3% and job gains continue, home sales could stabilize in the coming months,” Yun said in a statement about the latest pending home sales data. “Home sales in 2022 are expected to be down about 9%, and if mortgage rates climb to 6%, then the sales activity could fall by 15%.”