Housing Boom Is on Borrowed Time

Housing may have been swayed a bit by higher rates but has yet to be taken seriously. It may just be a matter of time.

At least it’s been an interesting year for the housing market. According to Freddie Mac, the average interest rate on a 30-year mortgage has increased to 5.25% from 3.1% at the end of December.,

making buying a home much more difficult. Sales have slowed, with the National Association of Realtors reporting on Thursday that 5.61 million previously owned or existing homes were sold in April, at an annual rate seasonally adjusted. This compares with a monthly average of 6.12 million last year.

However, it remains unclear what percentage of the sales decline was due to falling demand relative to insufficient supply. The number of homes on the market, relative to sales, remains very low and prices continue to rise, with the median price currently available for homes selling for a record $391,200 last month compared with $340,700 la a year earlier.

There are a lot of moving parts here. The low supply is probably related to the large number of homeowners who currently carry low mortgage rates and are afraid to move and end up paying more. Affordability concerns are probably keeping some buyers from going home hunting, but others may be worried that rates and prices will continue to rise so if they don’t act now, they may not be able to afford it. will never be able to possess. And high inflation – including rents – can serve as a further incentive to buy and lock in the price paid for shelters.

Ultimately, however, the negative effect of rising rates on the housing market is likely to prevail – if it hasn’t already. Existing home sales reflect closings, with contracts often signed a month or two earlier, so April existing home sales figures reflect transactions signed in March or May. 2, with buyers locking in rates much lower than they are currently.

In a hint of what could come, the National Association of Home Builders said earlier this week that its measure of potential buyer traffic, based on a monthly survey of builders, dropped sharply in May and is now somewhat below what was popular just before. epidemic.

Higher mortgage rates, rising prices and strong housing demand may not be sustainable for long. Here’s guessing they won’t.

With the average 30-year mortgage rate rising to 5%, home ownership may now be out of reach for millions of Americans. WSJ’s Dion Rabouin explains the impact on potential buyers, sellers and the housing market. Illustrated by: Adele Morgan

Write letter for Justin Lahart at justin.lahart@wsj.com

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https://www.wsj.com/articles/housing-boom-is-on-borrowed-time-11653044580?mod=rss_markets_main Housing Boom Is on Borrowed Time

Edmund DeMarche

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