The housing market continues to struggle after a lackluster spring season and with a bleak outlook for the upcoming months. Mortgage rates, which had been expected to decrease, rose above 7% by April, deterring potential homebuyers and causing many to postpone their search for homes. It is anticipated that mortgage rates may slightly decrease by the year’s end, but this might not be sufficient to attract buyers or convince homeowners to sell.
The spring homebuying season was disappointing, with sales of previously owned homes decreasing from the previous year. Affordability challenges such as high mortgage rates, low housing inventory, and record-high prices have contributed to the weak sales. Currently, the average rate on a 30-year mortgage stands at 6.95%, double what it was in July 2021.
The historically low inventory of homes on the market poses another challenge for potential buyers, although there was a slight increase in the number of homes available in May. However, the overall supply remains below pre-pandemic levels due to a lack of new construction and homeowners holding onto their properties. The “lock-in” effect, where homeowners with low mortgage rates are reluctant to sell, has also played a role in the limited inventory.
National median home prices hit an all-time high in May, rising 5.8% from the previous year. While price increases are slowing, experts predict a further slowdown in home price growth in the coming months. However, there is concern that a decrease in mortgage rates without an increase in housing inventory could lead to sellers raising their prices, further impacting affordability for buyers.
Homebuyers who can afford to buy now may benefit from a wider selection of homes currently on the market. Those able to make an all-cash purchase may find it advantageous to buy soon. Despite the market challenges, experts advise that prices are unlikely to drop, so there may be no need to wait for lower rates before purchasing a home.
