05/20/2023
As we move through spring homebuying season, buyers and sellers remain at a standoff.
Persistently high mortgage rates and home prices continue to put off many prospective homebuyers as fears of ongoing inflation, bank sector volatility, weakening economic growth and an impending recession hang in the air.
Meanwhile, the Federal Reserve voted to raise its key interest rate by one quarter of a percentage point on May 3, a move in line with most housing experts’ predictions. The Fed also signaled that it may pause rate hikes for the remainder of the year should inflation continue to fall. A Fed rate hike has an indirect impact on long-term home loans, such as 30-year, fixed-rate mortgages.
These circumstances have put a strain on the housing market, which remains a mixed bag.
On the one hand, home shoppers received good news, with the median existing-home sales price declining 0.9% to $375,700 in March compared to a year ago, according to the National Association of Realtors (NAR). This is the second consecutive month of year-over-year home price declines after a 131-month streak of record increases.
On the other hand, total existing-home sales dipped 2.4% from February to March and are down 22% from a year ago, per NAR.
“Home sales are trying to recover and are highly sensitive to changes in mortgage rates,” said Lawrence Yun, chief economist at NAR, in a report. “Yet, at the same time, multiple offers on starter homes are quite common, implying more supply is needed to fully satisfy demand. It’s a unique housing market.”
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