The National Association of Realtors reported existing home sales in the US saw a drastic surge of 9.5% from January, with 4.38 million houses sold. While sales were down 3.3% compared to the previous year, it marked the largest monthly gain since February 2023. Due to high population and economic growth, home builders are struggling to keep up with the large demand for single-family homes. Inventory rose 10.3% year over year to 1.07 million homes for sale at the end of February, which is still a low 2.9-month supply at the current sales rate.
Analysts predicted that with the increase in mortgage rates increasing to 7%, demand and prices would decrease. Unfortunately for consumers, higher demand continued to push the median price higher, up 5.7% from the previous year to $384,500. U.S. demand is currently so high that 20% of homes are selling above the list price.
https://www.cnbc.com/2024/03/21/february-2024-home-sales-spike.html
From someone who lives in California, this is horrible to hear. I have had first hand experience of the rising housing prices as someone who lives in Silicon Valley so I can attest that these numbers are not even that surprising. What did interest me however is how they mentioned that demand is what is driving these interest and housing prices up. I could not imagine trying to buy a house during a "bubble" of rising house prices so it's surprsing that people who want to be homeowners wouldn't wait for demand and prices to drop. Even the analysts had the same rationale expecting demand to decrease when prices increased; however, consumer behavior did not reflect that. I wonder what are some of the key factors that are driving the demand up if price increases are not deterring people to buy homes.
ReplyDeleteI wonder how much of this is just a resurgence post COVID-19. Now that people are coming back to work and are fully back in person, many people had to relocate again. However, this is now 4 years after the start of the pandemic, so it wouldn't make sense for the recent surge to have been caused by this. Another interesting factor with rising mortgages is the rise in credit delinquency. Although mortgage rates and credit cards may seem unrelated, it is not a far stretch to say people with more debt are more likely to struggle paying their mortgage.
ReplyDeleteI think that although the prices are consistently increasing for the housing market and harming the ability of people to purchase, this opens up opportunities for the home-rental market to establish a greater foothold than what they have previously had. Since most couples now-a-days are less likely to have kids or end up having only 1-2, this could greatly push rental home or apartment demand up. Ultimately, this can provide a similar alternative to purchasing a home while the market is pricey and demands a lot from the consumer.
ReplyDeleteDespite predictions of decreased demand due to rising mortgage rates, the surge in existing home sales and escalating prices suggest sustained high demand. How can the housing market balance affordability with this persistent demand?
ReplyDeleteIf they keep on increasing the interest rates, sales will most likely keep on going down each year.
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