High Prices Are Discouraging Home Buyers

High Prices Are Discouraging Home Buyers

discouraging home buyers
For the past 77 months in a row, existing-home prices have increased year over year. What’s more, the median home price in July was up 4.5 percent from last year. While good news for homeowners selling their houses, it’s bad news for purchasers, as the price increase led to a decline in buyer demand. As a result, existing-home sales slipped to the slowest pace on record since February 2016. Sales reached 5.21 million in July, with a substantial decrease in closings in the Northeast contributing to the decline. According to Lawrence Yun, chief economist for the National Association of Realtors, “Too many would-be buyers are either being priced out or are deciding to postpone their search until more homes in their price range come onto the market.”

Housing Affordability Impacted as Inventory Decreases
A rise in home prices isn’t the only factor impacting buyer demand. The recent increase in mortgage rates is also pricing some buyers out of the market. In addition, the housing market’s continuing supply woes are making it hard for buyers to find a home to purchase. At the end of July, there were 1.92 million existing homes available for sale, a decrease of 0.5 percent from a month ago and unchanged from a year ago. At the current sales pace, this level of inventory would sustain the market for only 4.3 months. The rise in prices and mortgage rates, coupled with the lack of supply, has contributed to a decrease in affordability. “This weakening in affordability has put the most pressure on would-be first-time buyers in recent months,” says Yun, “who continue to represent only around a third of sales despite a very healthy economy and labor market.”

Not Much Time Spent on the Market
The average home sold in just 27 days in July, a day longer than a month ago but three days faster than the 30 days it took a home to sell in July 2017. Of all the homes on the market, 55 percent sold in less than a month. With the lack of supply—and with new home construction failing to meet current buyer demand—homes are expected to continue to be sold in record time, especially moderately priced homes.

Regional Breakdown

Northeast – Existing-home sales annual rate of 660,000; a decrease of 8.3 percent from June and 1.5 percent from July 2017. The median price increased 6.8 percent from July 2017.

Midwest – Existing-home sales annual rate of 1.25 million; a decrease of 1.6 percent from June and 0.8 percent from July 2017. The median price increased 2.5 percent from July 2017.

South – Existing-home sales annual rate of 2.24 million; a slight decrease of 0.4 percent from June and 0.4 percent from July 2017. The median price increased 2.7 percent from July 2017.

West – Existing-home sales annual rate of 1.19 million; an increase of 4.4 percent from June but a decrease of 4 percent from July 2017. The median price increased 5.1 percent from July 2017.