#HousingCrisis #MortgageRates #RealEstateTrends
Housing Affordability Hits New Lows Amidst Record-Breaking Price Surge
The housing market continues to defy expectations, with April seeing a record-breaking surge in home prices despite rising mortgage rates and increased housing supply. This anomaly reflects the current unprecedented state of the housing market. The S&P CoreLogic-Shiller National Price Index reported a 6.3% increase in April compared to the same month last year, marking the second consecutive month of the national index surpassing its previous peak by at least 1%.
Despite the 3-month moving average, these price hikes occurred amidst a notable spike in the average rate for a 30-year fixed mortgage, which surged 6.5% to 7.5% in April, according to Mortgage News Daily. Brian Luke, the head of commodities, real, digital assets at S&P Dow Jones, remarked that 2024 is mirroring the robust growth seen in the housing market last year, with the market hitting an all-time high as it heads into the traditionally active summer season after a possible slowdown in the upcoming months.
While there's a slight deceleration in the annual and monthly gains on the price index, March recorded a 6.5% annual increase, contributing to what is now one of the most unaffordable markets in U.S. history for homeownership. Home prices have surged by 47% since 2020, with the median price now standing five times the median household income, as highlighted in a recent report from Harvard's Joint Center for Housing Studies.
The rental market, although experiencing a slowdown in rent growth due to an influx of new apartment units this year, still shows a 26% increase in prices compared to 2020, rising in three out of every five markets. Over 22 million renter households, representing half of all renters, are classified as 'cost burdened,' with more than 12 million households spending over half of their income on rent.
Moreover, homeowners are grappling with escalating insurance premiums, which surged by an average of 21% between 2022 and 2023, per the HJCH report, alongside rising property taxes. The housing market's imbalance in supply and demand continues to prop up prices, with housing supply witnessing a gradual increase, including an 11% rise in new listings in April compared to March, a 16% increase from April 2023, to an 18% year-over-year boost in total for-sale inventory.
Despite the surge in supply, it remains relatively scarce, particularly in light of strong demand. Zillow data revealed that the rapid uptick in mortgage rates pushed housing affordability out of reach for many potential buyers, resulting in a notable increase in listings with price cuts. However, well-priced homes continued to sell swiftly, with properties priced appropriately selling in just 13 days in April, only marginally slower than in April 2023. In May, inventory levels increased to a 3.7-month supply, with a balanced market typically characterized by a six-month supply.
Original Article: https://www.cnbc.com/2024/06/25/housing-affordability-price-mortgage-rates.html
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