Latest RE Market Talk

Home prices are soaring as the seller's market continues across the United States, making affordable housing increasingly elusive for the average American. Today on LUXE BLOG, we'll go over the impact on homebuyers and sellers alike. As usual, here on WilliamsLuxuryHomes.com we aim to provide HELPFUL info regarding both the local and national housing markets. If you find our content helpful, make sure to keep checking back. With that said, let's discuss some of the latest issues and stats regarding the real estate market.

Skyrocketing Home Prices

The National Association of Realtors (NAR) reported a record-high national median sales price of $419,300 for single-family homes in May. This price surge is attributed to the lack of inventory and the growing demand for home ownership.

• National median sales price: $419,300
• Lack of inventory driving prices
• Demand for home ownership rising
• Forecast for continued price growth

First-time homebuyers are finding it challenging to manage the substantial down payments required. For a $400,000 home, a 10 percent down payment translates to $40,000, often necessitating financial help from family or friends.

Also Read: Mortgage Rates May Decline As The Fed Considers Cuts In 2024

The National Median Home Price Was $419,300 In May 2024

Declining Home Sales & Rising Inventory

While home prices are climbing, existing home sales have declined. In May, NAR reported a 2.8 percent drop in sales from the previous year despite a 6.7 percent increase in inventory.

• Existing home sales down 2.8%
• Inventory up 6.7% from April
• 30% of homes sold over asking price
• Bidding wars remain common

Only the Midwest experienced a slight increase in home sales, while the Northeast saw the most significant decline. Regional price variations highlight the uneven impact across the country.

The Impact Of Interest Rates

High interest rates are a significant factor affecting both buyers and builders. The current 30-year fixed rate mortgage is around 6.95 percent, a substantial rise from the historically low rates in recent years.

• Current mortgage rate: 6.95%
• Higher rates affecting affordability
• Builders reluctant to start large projects
• Interest rates expected to stay between 6-7%

Despite higher costs, many buyers are still entering the market. Couples starting families and retirees downsizing are among the most common homebuyers today.

Cash Purchases & Market Stability

A notable trend is the increase in all-cash purchases. In May, 28 percent of homebuyers did not take out a mortgage, reflecting a strategic move to avoid high interest rates.

• 28% of purchases made with cash
• Cash buyers avoid high mortgage rates
• Market stability despite high prices
• Low likelihood of a market crash

Experts like Dutch Mendenhall and Matt Willer suggest that while prices may stabilize or slightly soften, a significant market crash is unlikely due to current regulations and lending practices.

Also Read: May 2024 Housing Market Trends Report Shows Inventory Growth

Higher Interest Rates Continue To Affect Affordability

The Rental Market Boom

With home prices and interest rates high, many potential buyers are opting to rent instead. The rental market is strong as people find renting less stressful and more flexible (compared to home ownership).

• Rental market booming
• Potential buyers waiting for price drops
• Renting seen as less stressful
• Flexibility in location

Builders are cautious about overextending, leading to a cyclical nature in the building industry. This caution contributes to the ongoing shortage of new homes, exacerbating the seller's market conditions.

The Future Outlook

The National Association of Realtors predicts the seller’s market will persist into 2025, with many homeowners remaining locked into their current low mortgage rates. This trend, combined with the slow pace of new construction, suggests that high home prices and limited inventory will continue.

• Seller’s market likely to persist into 2025
• Low mortgage rates keeping homeowners in place
• Slow new construction pace
• Continued need for affordable housing solutions

To find more affordable choices, potential buyers are advised to research and consider less conventional options, such as smaller homes or properties further from metro areas.

Also Read: Home Prices Have Begun To Drop In The Greater Phoenix Area