House Price Boom Wanes As Buyers Pull Out

c. This is due in part to first-time homebuyers backing out of deals. Also contributing to the slowdown is rising mortgage rates.

Home prices rose 0.6% in May

While home prices rose for the second straight month in May, the increase was less than half of the increase in April. The increase is still the second-largest increase in the data series. May’s increase was 2.3% higher than the previous year. Overall sales activity was stable compared to May 2021, despite concerns about a possible recession. But June’s drop in buyer interest could signal a slowdown in the housing market.

While prices in some metro areas are expected to continue rising, others are experiencing slower growth. The S&P Dow Jones Indices report for June suggests that home prices will rise by just 0.6% month-over-month and 4.3% year-over-year in the coming year. California hosted three of the six metro areas with lower growth.

Average home price is still 9.3% below 2006 peak

According to the latest figures from Zillow, the average home price is still 9.3% below its peak, with the national average still 30 percent below its peak. That is still a significant decline for the housing market. Zillow’s chief economist, Stan Humphries, says that the national numbers may be skewed by the strong rebound in hard-hit markets like Phoenix and Las Vegas. In those cities, investors have helped push prices higher.

The increase in prices is driven by tighter inventory, increased demand, and the availability of financing. The number of foreclosed properties has also declined, leading to higher prices. Yet the rate of price increases is not sustainable.

First-time buyers are pulling out of deals

House prices are soaring, but some first-time buyers are pulling out of deals. According to a report from NAR, the biggest reason for this is inexperience. Inexperienced buyers have a short credit history, which can create problems when applying for a mortgage. First-time mortgage applications are also subject to greater scrutiny than others, meaning that buyers may find themselves unable to secure the finance they need to buy their dream home.

Home buyers are being forced to pay more for a house because of high interest rates. In fact, the COVID pandemic started with a financial shock, which triggered a panic among buyers. In July alone, over 63,000 home buyers backed out of purchase agreements. This is the highest share since April 2020.

Rising mortgage rates are contributing to declines in home values

A rising mortgage rate is one of the most prominent reasons why home values are on the decline in the US. These rising mortgage rates have made home ownership more unaffordable than it has been in nearly four decades. In addition, a shortage of affordable housing has trapped many sellers in their homes. This is affecting home sales, and the most expensive markets are seeing the steepest declines.

While the Federal Reserve has been aggressive in raising interest rates to combat inflation, the corresponding increases in mortgage rates have slowed the housing market. This has put more pressure on middle class home buyers who now have to compete with wealthy investors and higher-income buyers. In addition, rising rates add thousands of dollars to the cost of purchasing a home, especially if you have no down payment saved. For example, a $429,000 home would cost an extra $5,750 per year at current rates.

Housing market is expected to continue upward trend

While the housing market is in recovery mode, the pace of new construction is slowing down. According to Freddie Mac’s chief economist, new home building will remain on hold until builders have a better idea of how well their current inventory will sell. In the meantime, many potential home buyers will find it difficult to purchase a home due to rising prices.

The recent drop in mortgage rates helped to drive up the price of homes. The fall in rates led to a surge in home offers. However, higher rates will keep the market from reaching a peak. The Federal Reserve announced another hike this week, which will keep mortgage rates volatile.