Home sales dropped in March due to rising mortgage rates around 7.5%. The number of homes for sale has increased, but it's not enough to offset the impact of higher borrowing costs. The median home price hit a record $393,500. First-time buyers are struggling with affordability challenges, while investors are pulling back. The housing market is stuck in a narrow range, with sales low due to affordability and inventory shortages.
Since 1963, home prices have risen 24 times more than inflation, resulting in a shortage of affordable housing. The median home price in the U.S. is now around $412,778, while inflation has increased by only 10 times during the same period. The high demand for housing, coupled with slow construction times and zoning restrictions, has contributed to this price increase.
Despite traditionally being the peak season for home sales, recent years have witnessed a shift in trends. Experts now recommend sellers wait until June, as homes listed in the first two weeks of that month have historically sold for up to 2.3% more compared to spring listings. While home supply is recovering, it's still not sufficient to meet demand, keeping prices elevated. Buyers may consider purchasing now and refinancing later when mortgage rates potentially decrease during the summer.
President Biden's proposal includes tax credits to enhance homeownership affordability for middle-class families. First-time buyers would receive $5,000 annually for two years, while families upgrading would be eligible for up to $10,000. However, experts express skepticism that these credits alone can address the underlying issues of high mortgage interest rates and insufficient affordable housing supply.
