Home sales have fallen to the slowest pace since June 2020, when 4.77 million homes were sold throughout the year, but that slow down has not stopped the soaring price of home ownership.
Home prices are setting new records even as real estate sales cool off, showing how hard it is for most people to buy a home in Biden’s economy. The National Association of Realtors (NAR) said Tuesday that the median sale price for a previously occupied home hit $407,600 in May.
That’s an almost 15% increase from the previous year and an all-time going back to 1999, according to the NAR.
At the same time, sales of existing homes slowed for the fourth consecutive month, with house-hunters feeling the pinch of climbing mortgage rates and record-high prices.
The NAR said that sales fell 3.4% last month from April to a seasonally adjusted annual rate of 5.41 million.
“Home sales have essentially returned to the levels seen in 2019 – prior to the pandemic – after two years of gangbuster performance,” NAR Chief Economist Lawrence Yun said in a statement.
The housing market is slowing as homebuyers are facing much higher home financing costs than a year ago. The slowdown follows a quick rise in mortgage rates nationwide.
Average long-term U.S. mortgage rates had their most significant one-week jump in 35 years last week. The Federal Reserve raised its key rate by three-quarters of a percentage point to combat the worst inflation in 40 years.
The average rate on a 30-year home loan climbed to 5.78% last week, the highest since November of 2008.
The current slowdown in home sales has led some economists to adjust their housing market outlook for 2022. Realtor.com expects U.S. home sales to decline 6.7% from last year.
The market cooldown is also having an impact on those employed by the industry. Redfin and Compass, two tech-driven real estate firms, have announced major layoffs, as each has seen a significant revenue and market value reduction.
Despite the slowing market, the nation’s record-high inflation, which has increased the cost of goods and rising labor costs, has driven the cost of construction much higher. According to the latest Consumer Price Index, the cost of a new home has increased more than 100% in the last two years.