Long Time Coming
The US housing market has been on fire for the past decade, but there are now very early signs that this decades-long housing bull market might finally be coming to an end.
The median home sale price hit $350,246 last week — down 0.6% from last year. This sounds like a fairly insignificant data point at first glance, but it’s the first time that median home sale prices have dropped on a year-over-year basis since 2012.
The recent spikes in mortgage rates over the past year is disincentivizing new homebuyers from entering the market. When there are fewer homebuyers on the market, housing prices will typically fall to match the lower demand. But this hasn’t been the case so far.
People trying to sell their homes have been reluctant to offer lower prices. This may be exacerbated by the knowledge that they could have made more if they sold last year.
However, the pricing standoff is finally starting to tip in buyers’ favor. Median home sale prices have now dipped in roughly half of the 50 most populous US metros.
Time To Buy?
Although home prices have fallen slightly, it doesn’t mean they’re affordable. In fact, first-time homebuyers are facing the least affordable market on record.
The Mortgage Banker Association’s 30-year mortgage rate clocked in at 6.7% for the week ended February 24, a new high since November, and a leap of around 2.5% year-over-year. With such a spike seen in a short period of time, prospective buyers may be willing to wait for a sudden jump in the opposite direction before buying in.
However, some believe this decline in home prices could be a sign that the top of the housing market is in. So over the next few months, first-time homebuyers will watch closely for the price shift needed to sign off on the dotted line.
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