As rising mortgage rates prompted home sales to dip for the second month in a row, the average price of existing homes in the United States reached a new high of $375,300 in March. According to data from the National Association of Realtors (NAR), the median price for a home is up a staggering 15% from last March, marking 121 straight months of year-over-year increases in the housing market. The Washington Examiner reports that home prices are at their highest level since the NAR began measuring the indicator more than two decades ago but purchases decreased 2.7% from February to a seasonally adjusted annual pace of 5.77 million in March, and sales fell 4.5% year over year.
NAR’s chief economist Lawrence Yun stated, “The housing market is starting to feel the impact of sharply rising mortgage rates and higher inflation taking a hit on purchasing power. Still, homes are selling rapidly, and home price gains remain in the double-digits.” He also explained that “Home prices have consistently moved upward as supply remains tight. However, sellers should not expect the easy-profit gains and should look for multiple offers to fade as demand continues to subside.”
Mortgage rates jumped after the Federal Reserve raised interest rates for the first time in years to combat inflation. The typical 30-year fixed-rate mortgage was 5% as of Wednesday, up roughly 2 percentage points from a year ago. Housing in the United States is becoming less affordable as interest rates rise. In addition to the NAR data, the S&P CoreLogic Case-Shiller U.S. National Home Price Indices indicated that home prices climbed by an annual 19.2% in January, up from 18.9% the previous month.
After initially driving increasing demand as purchasers raced to lock in mortgage rates before they pushed too far upward, the rising interest rates are now causing demand to fall. As the Fed continues to raise its interest rate goal to rein in inflation, Yun believes that house purchases will fall by around 10% this year. Everything is becoming more pricey as housing becomes more unaffordable. Consumer prices rose 8.5% in the year ending in March, the highest level of inflation since November 1981.