Has the local housing market slowed down? Are home prices beginning to soften due to the rising interest rates? Both of these questions are usually asked of me at least once a day and my reply is simply, let’s compare the local market data with the national housing data.
Nationally, there are clear signs the housing market is slowing with increased mortgage interest rates and declining sales for the third consecutive month. The increasing price of entering home ownership has impacted first time buyers the most. Many economists predict home sales will continue to soften which in turn will provide a much-needed lift to housing supply.
As economists and real estate professionals across the country look to the typical year over year comparisons of housing data to predict expectations for the last half of 2022, one of the biggest challenges is to accept the unbelievable performance of the housing market in the last 2 years. Out of the ordinary circumstances such as all-time low mortgage rates, remote work, and a shortage of housing supply and building materials made 2020 and 2021 historical years for real estate. Therefore, drawing a comparison to them should be kept in perspective. With 17% of the entire country’s GDP attached to real estate, understanding where the real estate market is headed is vital information.
The local market data as of May 2022 showed an 18.4% increase in median sales price and a decrease of 31% of housing affordability in our region. The Housing Affordability is an index of the median household income necessary to qualify for the median-priced home under prevailing interest rates. Locally we have seen a decline in affordability for 12 consecutive months but the dramatic change in affordability will continue with rising interest rates and continued increase in the median sales price.
In summary, the local market pace is slowing slightly because affordability is making it very difficult for some buyers. However, those buyers are still eager to enter the housing market because rent prices have equally escalated. Since it will take several years to increase the housing supply, home prices will not be dipping anytime soon. If you need any real estate assistance, don’t hesitate to contact Beth at Sold by the Gold!