The biggest problems confronting the housing market appear to be soaring home prices and mortgage rates plus a shortage of supply.
The median price for existing-home sales totaled $407,600 in May, up 14.8% from May 2021, according to the National Association of Realtors. Year over year, prices have climbed for 123 straight months (more than 10 years).
On the interest-rate front, the average 30-year fixed-rate mortgage rose to 5.51% in the week ended July 14 from 5.3% a week earlier and 2.88% a year earlier, according to Freddie Mac.
Meanwhile, a historical analysis from Up for Growth, a group working to solve the housing shortage, shows that as of 2019, the country was 3.8 million homes short of meeting housing needs. That more than doubled the 2012 total of 1.65 million.
‘America Is Experiencing a Housing Crisis’
“America is experiencing a housing crisis,” the study said. “As people migrate in search of jobs, education, and economic opportunities, the demand for housing in our most economically productive regions far exceeds the production of new homes.”
Looking at more recent data, in a survey of NAR members 57% cited lack of inventory as the leading reason preventing potential clients from completing transactions last year.
“In the last year, realtors continued to navigate a challenging housing market and said the biggest factor holding back the housing market was tight inventory,” Jessica Lautz, the NAR’s vice president of demographics and behavioral insights, said in a statement.
To be sure, there is a glimmer of hope. For the week ended July 9, active inventory was up 28% from a year earlier, according to Realtor.com. Active inventory refers to homes that are being actively marketed for sale.
New Listings Lift Inventory
“Several weeks of new listings coming online helped boost the inventory level,” Realtor.com economists George Ratiu and Sabrina Speianu wrote in commentary accompanying the data.
“Even though the number of homeowners putting properties for sale took a break last week, houses are also spending longer on the market in many large metro areas, contributing to a boost in homes for sale.
“Real estate markets remain undersupplied compared with 2019, but they are moving in the right direction.”
Another positive: the shrinking competition buyers face in snagging homes is “giving homebuyers room to negotiate,” Taylor Marr, an economist at real estate brokerage Redfin, said in a statement.
“Buyers are increasingly keeping rather than waiving inspection and appraisal contingencies. That gives them the flexibility to call the deal off if issues arise during the homebuying process.”
