The US housing market is approaching a sales slowdown
Image: DS News
Fewer Americans are planning to buy a home this summer compared to previous years, according to new data from the National Association of Realtors. The NAR’s pending home sales index fell to a four-year low in April, as higher mortgage rates applied negative pressure to home sales.
Why it matters: The pending-sales index is used to predict the volume of completed home sales in the near future, as houses typically go under contract a month or two before they’re officially sold. And since the index is based on signed contracts, it shows how buyers are reacting to mortgage rates in real time.
- In April, the US saw a sharp increase in average 30-year fixed mortgage rates, which rose from 6.9% to 7.5% – causing many would-be homebuyers to pull back from the market.
A slow market is getting even slower
A growing number of signs indicate the US housing market will cool off in the near future, despite already experiencing historically low sales activity in recent years.
The NAR’s pending home sales index fell by 7.7% in April, far below economists’ predictions of a 0.7% drop. The index also found home-sale activity fell last month to its lowest level since Spring 2020, with declines seen across every US region, especially the Midwest and West.
- Overall, data shows homebuyers across 20 major US cities are facing higher prices than ever – which can partially be attributed to low housing inventory.
- America currently has 1.2 million homes on the market, down from 1.9 million in May 2019 and a recent peak of 3.8 million in May 2008.
Looking ahead… Experts say elevated mortgage rates and low supply will continue to curb sales as the housing market enters the peak of its traditionally busy spring-summer season. The industry is also preparing for another home-market wrench in August, when the NAR will eliminate its customary 6% commission for real estate agents.
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Sprinkles from the Left
- Some commentators argue that many Americans should think very carefully before committing to buying a home, since it’s far from guaranteed that prices will always go up, and it represents a poor investment compared to other vehicles like stocks or bonds.
- Others contend that homebuyers have good reason to be optimistic about houses becoming more affordable in the future, since the elimination of required commission fees will help increase transactions and get the property market moving again.
- “Is it time to wave goodbye to the white picket fence?” –Charles Lane, Catherine Rampell and Alexi McCammond, WaPo
- “Squeezing Realtors Is Just What the Housing Market Needs” –Conor Sen, Bloomberg
- “Want affordable housing? Take the chassis off manufactured houses.” –Lee E. Ohanian and James A. Schmitz, WaPo
Sprinkles from the Right
- Some commentators argue that while there are a lot of negatives about the current US housing market, there’s still room for optimism due to new laws eliminating required commission fees for real-estate brokers.
- Others contend that whoever is in the White House next year will have a nationwide real estate mess dumped in his lap, and the wrong public policies could mean a repeat of the last housing collapse.
- “Reasons for hope and despair about the housing market” –Tiana Lowe Doescher, Washington Examiner
- “Are we in for another housing collapse?” –E.J. Antoni and Anthony F. Esposito, Washington Times
- “Investors are breaking the housing market” –Dallas Morning News Editorial Board
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