Surprising Shift: Home Price Increases Slow Down More Than Anticipated

Rising home supply and slowing demand are finally cooling off housing prices, with changes happening more rapidly now. In April, home prices across the U.S. rose just 2.7% compared to the previous year, according to the S&P CoreLogic Case-Shiller Index. This is a drop from 3.4% in March and the smallest increase in nearly two years.

More recent data from Parcl Labs shows that national prices are flat compared to last year. The overall price drop is evident in both the 10- and 20-city composites measured by the index, which are now far below their peaks. Much of the increase in April was concentrated in the last six months, indicating that the spring market gave prices a boost.

Nicholas Godec, head of fixed income at S&P Dow Jones Indices, noted a notable shift in market trends. “Regions that flourished during the pandemic are now lagging behind. In contrast, traditional markets in the Midwest and Northeast are gaining ground.” This change indicates a more stable market driven by actual needs rather than speculation.

New York led in price increases with a rise of 7.9%, followed by Chicago at 6% and Detroit at 5.5%. Conversely, previously hot cities like Tampa and Dallas are seeing declines, down 2.2% and 0.2% respectively. San Francisco’s prices are flat, while Phoenix and Miami saw slight increases of just over 1%.

High mortgage rates, which climbed over 7% in April, deter many buyers, particularly first-time homebuyers. In May, only 30% of sales were made by first-time buyers, a drop from the usual 40%. This is largely due to higher monthly payments that make it tougher for newcomers.

Although home supply is increasing, it remains below pre-pandemic levels. A report from Redfin reveals that only 6% of sellers risk selling at a loss. While this is a slight increase from last year, it’s still historically low.

Experts believe that while prices are declining, they are far from the drastic drops seen during the subprime mortgage crisis and the Great Recession. Godec stated, “Housing supply is still tight. Many homeowners are reluctant to give up their low-interest rates from the pandemic, and new builds aren’t keeping up with demand. This shortage helps to maintain a price floor and prevents severe declines.”

Understanding the market’s dynamics can help potential buyers navigate these shifting trends. For more in-depth perspectives, you can check the National Association of Realtors for up-to-date statistics and insights.

Source link

Mortgages,Real estate,Housing,business news