Price shock is nothing new in the real estate market within the last two years.
Home prices nationwide rose a record 20.9% from March 2021 to March 2022. Monthly, prices rose 3.3% from February to March. Looking ahead, home prices are expected to increase 1.2% monthly from March to April and a 5.9% rise from March 2022 to March 2023. This comes at a time when the 30-year fixed-rate mortgage is currently just over 5% from the 2.98% seen in April 2021.
Redfin reports that more sellers of homes are dropping their prices, but buyers find little relief. The share of home sellers who lowered asking prices surged to a six month high of 15% for the four weeks ending May 1. That’s up from 9% a year earlier.
We will not see relief any time soon from these higher home prices though.
Compared to 2007, right before the housing crash, there are about 12 million more households today but three million fewer homes to buy. That begs the question, how can we have a bubble in these conditions?
Affordability is another point. Even though wages aren’t rising as fast as home prices, they are rising enough to meet the higher typical monthly payment. For two earners, it takes about 19% of monthly income to make a mortgage payment, compared with 30% in 2006.
Consumer sentiment toward housing hits its lowest level in two years while affordability constraints mount as mortgage rates and home prices continue to rise, reports Freddie Mac. Right now, it is not an enjoyable experience to buy a home. But those who are buying right now are seeing incredible equity gains in just a few short months after buying.
If you are looking to purchase a home right now, talk to us. We do think it is still a good time to buy, especially through off-market deals. Reach out to discuss with us how to do that: kthayer@rfmoc.com
