Median home price falls to $417,000 – down from June’s record-high of $450k

Median home prices in the US have fallen to $417,000, a new report finds – a signal to millions of Americans that after a year of volatile increases, it may be time to buy.

The new number, recorded by Realtor.com, is significantly more affordable than June’s all-time high of $449,000, which was seen after a burst of Pandemic-fueled home buying drove the number of homes for sale to an all-time low.

However, stocks have since recovered, subtly boosting late-summer sales – giving buyers who shied away from buying real estate over the past year a glimmer of hope.

That said, it may be premature to assume that real estate volatility has reached a stopping point, Realtor researchers wrote — as loan rates remain historically high despite recently easing inflation.

The rate for a 30-year, fixed-rate mortgage is currently at 6.6 percent — after hitting a record seven percent recently or for the first time in decades, meaning median payments are now $900 a month higher. than last year around this time.

That number is also up dramatically from 12 months ago – when the real estate spike first started to be felt.

The data serves as a clear reminder that, despite some recent calm, buyers can still struggle with affordability in a market that is markedly more expensive than a year ago.

Danielle Hale, chief economist at Realtor.com, cautioned that while prices are an improvement from a few months ago, the combination of still high home prices and rising interest rates has left Americans with limited options.

“While prices are falling month over month, they are still up double digits from a year ago,” Hale wrote in the agency’s report, released Thursday, noting, “Now that mortgage rates are also rising , buying a house is more expensive than last year.’

Hale added that a large-scale residential real estate slowdown could be in the offing, such as unsustainable levels of affordability that have persisted since the pandemic continue to deter buyers and more homes are on the market.

The researcher wrote: ‘We will see fewer new homes coming onto the market until the end of the year and possibly early next year.’

Hale’s stark forecast — which echoed those of several other prominent financiers and companies broadcast over the past week — came in at 46.8 percent more homes for sale this month compared to the same time last year.

In actual numbers, the increase means there are an additional 240,000 homes for sale on any given day this month compared to 2021 – an increase compounded by the fact that property owners have struggled to sell homes at exorbitant prices. to sell

As a record number of homes sit on the market untouched, new listings are down 17.2 percent during the year, Realtor notes, adding that due to this reduced demand, a property is now usually on the market for 56 days – instead of the eight last year.

Economists, meanwhile, have also warned that a large-scale slowdown in residential real estate is on the horizon, citing unsustainable levels of housing affordability.

Earlier this week, Bank of America CEO Brian Moynihan told CNN that Americans will have to endure it anyway two more years of financial ‘pain’ as the Fed continues to raise interest rates repeatedly to quell inflation.

A few weeks earlier, JPMorgan Chase CEO Jamie Dimon issued a similar warning, saying Americans should brace themselves for an economic “hurricane” — especially in the real estate market.

David Solomon, head of Goldman Sachs, meanwhile, told CNN in July – ahead of the recent slowdown since August – there is a “good chance” the United States has not yet reached peak inflation.

Kieran Clancy, a senior U.S. economist at Pantheon Macroeconomics, echoed these sediments Monday, telling another outlet that a “price collapse” is imminent.

Meanwhile, the Fed is frantically trying to tackle the housing bubble with a slew of aggressive rate hikes, slowing inflation but also raising mortgage rates.

The maneuvers have helped fuel the national decline in home sales, Realtor wrote, an unforeseen side effect that so many had warned that the central bank’s strategy risks sending the economy into recession.

Others, however, had dismissed the prospect of a nationwide slump, claiming that prices had fallen due to depleted inventories. enough buyers for the relatively small number of homes.

But with stocks down nearly 50 percent from last year, it seems these experts hadn’t anticipated the prospect of potential home sellers may choose to sit on their properties rather than take a loss list – as there are still locked in mortgages with extremely low rates that they are reluctant to give up.

This has created something of a stalemate between cash-strapped sellers and buyers, who, the data suggests, have become reluctant to make offers that were common only a few months ago.

“We’ll see fewer new homes come onto the market by the end of the year and possibly early next year,” Hale advised.

The average contract rate on 30-year mortgages recently peaked above 7 percent for the first time in 20 years, though it fell to 6.9 percent last week amid signs of easing inflation, according to the Mortgage Bankers Association.

Higher rates have depressed demand from homebuyers and home sales volume plummeted.

While pointing to a troubled economy, the lower prices are likely to be welcomed by buyers frustrated by rising asking prices.

Analysts, meanwhile, are turning to the prospects that home prices could see a correction, with the chief economist for the National Association of Realtors saying trends in new home prices could also vary by region.

“The upmarket West Coast markets are likely to see some price declines following this rapid price increase, which is the result of years of limited housing construction,” senior economist Lawrence Yun said.

He added that in the Midwest, where the most affordable housing prices are found, prices may rise “as both incomes and rents rise.”

Enrique Martínez-García, a senior research economist at the Dallas Fed, also noted that the U.S. housing market’s recent explosive price growth is unsustainable, citing that home prices rose 94.5 percent from the first quarter of 2013 to the second quarter of 2022, a gain of 60.8 percent after adjusting for inflation.

“This unprecedented pandemic boom poses undue risk to the U.S. economy, putting pressure on housing rents and, consequently, inflation,” he wrote.

“The possibility of a sharp price correction leading to economic contraction — if it materialized — would further complicate the Federal Reserve’s efforts to fight inflation.”

Unemployment, meanwhile, remains low despite the bank’s efforts to stabilize the economy. Meanwhile, homeowners who have bought in recent years have held rock bottom prices, making their payments affordable.

While that may serve as good news to some, the development also indicates an almost certain rise in defaults – like the one that crashed the US housing market in 2008.

Forecasts about the future of the housing market still vary widely. November real estate numbers will be released in the coming weeks to shed more light on the state of the residential real estate market.