Will house prices start to become more affordable? That’s the question many potential buyers ask, and recent data from the National Association of Realtors (NAR) may shed some light on the matter. NAR reports that while the median existing home price rose to $416,000, the percentage increase was down from the previous year.
Mortgage demand at 22-year low
According to the Mortgage Bankers Association (MBA), mortgage applications fell 6.3% for the week ending July 15. “Mortgage applications fell for the third consecutive week, reaching the lowest level since 2000,” said Joel Kan, associate vice president of economic and industry forecasting at the MBA.
“Purchasing activity has declined for both conventional and government loansas the weakening economic outlook, high inflation and ongoing affordability issues impact buyer demand,” Kan added. “The drop in recent purchase orders aligns with slower homebuilding activity due to reduced buyer traffic, continued shortages of building materials and higher costs.
In addition, inflation increased by 9.1% over the past 12 months, according to the consumer price index, which was higher than expected. Since the beginning of the year, 30-year mortgage rates fell from 3.22% to 5.3%, according to data from Freddie Mac. That’s nearly a 65% increase. The combination of higher inflation and higher mortgage rates dramatically increased costs, slowing demand.
Increase in supply
In addition to drop in demand, the supply of housing has increased. Total housing inventory reached 1.26 million units at the end of June, according to a report by NAR. This is an increase of 9.6% over May and 2.4% over the previous year. The number of unsold homes is at a three-month supply, up from two and a half months in June 2021.
What potential buyers can do
With more homes on the market and falling demand, home prices are begins to stabilize. But with the high cost of houses and mortgage rates soaring this year, many people can afford less. This naturally discouraged potential buyers.
If you’re looking to buy a home, you might want to wait a little longer and save a bigger down payment. Or you can play with our mortgage calculator to see what you can afford in different situations. And if you’re new to the world of home buying, take a look at our guide for first time home buyers for guidance on the process.
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