Even though new sellers withdrew from the market before the Fourth of July vacation, the amount of active inventory in the housing market continued to rise this week at a double-digit yearly rate.
In addition to sizzling inflation at a 40-year high, this year's summer housing markets are feeling the heat, according to George Ratiu, senior economist and manager of economic research for Realtor.com.
There are fewer dollars left over from each paycheck as consumers pay significantly more for cars, clothing, food, gasoline, and services at a time when home affordability is a problem that is getting more difficult to solve.
Only 23% of homes on the market are affordable for a family making $75,000, down from 50% of the inventory in 2018," according to Ratiu. Borrowing costs will increase as the Fed fights inflation, slowing demand at a time when there are more properties on the market. As a result, prices will keep adjusting until they reach a new equilibrium.
In its 30th consecutive week of double-digit annual gains, the median listing price increased by 15.9% from the previous year. However, the rate of increase in listing prices is slowing, falling below the rate seen in late May and early June. With softening demand and rising supply, Realtor.com anticipates that home price growth will slow further in the second half of 2022.
A drop in new listings, a gauge of how many sellers are advertising their properties, versus a year ago is indicative of a slowdown in seller activity over the Fourth of July vacation. However, in 13 of the last 16 weeks, there have been more homes listed for sale this year than there were last year; this tendency is anticipated to continue. Many homeowners are prepared to proceed with their Covid-delayed plans to sell while taking advantage of the current high prices.
Active inventory increased by 28 per cent over the previous year. The change in supply is the result of numerous new postings that have been posted online over the past few weeks, raising the inventory level by almost a third from a year ago.
In many major metro regions, houses are also staying on the market for longer, which also contributes to an increase in the number of available properties.
Compared to 2019, the survey revealed that real estate markets are still undersupplied, although they are progressing in the correct direction.Homes were on the market for just one day less than at this time last year.
As increased costs and interest rates harm demand, the rate of transactions is significantly slowing down. Homes will start to stay on the market for longer at this rate, according to Ratiu, and sellers will face increased competition.
By calculating the amount of income required for main home ownership expenses on a median-priced home, assuming an 80 per cent loan of the purchase price and a 28 per cent maximum debt-to-income ratio, ATTOM determines affordability for average wage earners.
The monthly mortgage payments for buyers are now between 40% and 50% higher than they were a year ago, which many prospective buyers simply cannot afford, according to Rick Sharga, executive vice president of market intelligence at ATTOM. "Interest rates almost doubled" meaning this.
Several variables, such as a retraction from prospective sellers who might want to hold off until the market strengthens once more, might stymie the development of inventory levels. However, Hale of Realtor.com pointed out that pending and new house sales were up this month, suggesting that some consumers may feel the moment is perfect to buy.
Home buyers today may be more motivated now that they are seeing more possibilities, according to Hale, as prospects for higher future mortgage rates climb.