Limited inventory and high costs lead to decline in pending sales
The US housing market continues its wild ride, with home prices setting another record high even as rising mortgage rates and low inventory push potential buyers out of the market.
Home prices have reached another record high, with the median sale price hitting $387,600 during the four weeks ending May 19, up 4% from a year earlier, according to a new report from Redfin.
The continued rise in home prices, despite a 4.2% year-over-year decline in pending home sales - the biggest drop in three months - was attributed to a persistent lack of housing inventory on the market.
“Prices keep rising despite declining sales because there aren’t enough homes on the market,” the report stated, noting that new listings were up about 8% year-over-year but inventory remained lower than typical spring levels.
High housing costs are also taking a toll, with the median monthly mortgage payment reaching $2,854 - just $20 shy of April’s all-time high - even as average mortgage rates dipped to 7.02% from 7.22% at the start of May.
Read next: How are high mortgage rates affecting US homebuying activity?
“Move-up buyers feel stuck because they’re ready for their next house, but it just doesn’t make financial sense to sell with current interest rates so high,” said Sam Brinton, a Redfin agent in Salt Lake City. “The homeowners listing right now are often doing so because they need to: family emergencies, having a baby and needing more space.”
Brinton advised buyers to be prepared, as “many sellers are willing to negotiate” if homes don’t have competing offers, suggesting offering below asking price or requesting concessions.
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