Hey, have you heard about the current state of the US housing market? There’s no question that home prices are cooling down after the rapid price increases we saw during the pandemic. Home prices fell year-over-year in February for the first time in 131 months, which ended the longest streak of price growth.
In April, the median existing-home sales price dropped 1.7% compared to the previous year, reaching $388,800. One of the factors affecting the market is the increase in mortgage rates, which have doubled since last year, making it harder for homebuyers to afford properties. On top of that, concerns about the economy, layoffs, and the possibility of a recession are causing some prospective buyers to hold back.
However, experts don’t believe this means a housing crash is imminent. According to Lisa Sturtevant, the Chief Economist at Bright MLS, there’s little evidence to suggest a market crash. For a significant drop in home prices, there would need to be a considerable decrease in demand or a substantial increase in supply.
Despite the slight drop in prices since February, there’s still strong demand for housing due to a lack of inventory and a robust job market. One-third of homes sold above the listed price recently, and the typical home received three offers. Although properties are spending less time on the market than last year, the limited inventory still needs improvement.
One reason for the low inventory is that many homeowners have mortgage interest rates below 5%, discouraging them from selling and buying at higher speeds. The total housing inventory in April was slightly higher than the previous year but still relatively low. Even if there’s a downturn in demand, the limited supply should prevent a collapse in home prices.
While there is always a possibility of increased home listings due to significant job losses, experts believe that major job losses are unlikely. The labor market remains tight, and the influx of homes for sale is expected to be insignificant.
Builder confidence in the newly built single-family homes market has been increasing, indicating positive sentiment. The inventory of new houses for sale has increased slightly, and the median sales price declined in April. Experts suggest that this price adjustment is likely temporary, and a rebound in single-family housing starts is expected later this year.
It’s important to note that if there’s a price correction, it won’t be as severe as the housing crisis in 2008. Today’s lending standards are much stricter, even with low-interest rates, which helps mitigate the risks associated with subprime loans.
Overall, the housing market’s current state suggests a cooling down rather than a crash. While challenges include rising mortgage rates and limited inventory, experts remain optimistic about the market’s resilience.