The cost of a typical home in the US tops $400,000 for the first time

Sky-high home prices are reaching new heights even as home sales slow, showing how difficult it is for most people to buy a home in this economy. The median selling price for a previously occupied home rose to $407,600 in May, the National Association of Realtors said Tuesday. That’s a nearly 15% jump from a year earlier and a record since 1999, NAR said.

At the same time, existing home sales slowed for the fourth straight month, with homeseekers feeling the pinch rising mortgage rates and record prices. Sales for the past month fell 3.4% from April to a seasonally adjusted annualized rate of 5.41 million, the NAR said.

Home sales have fallen to their slowest pace since June 2020, when they were at an annualized rate of 4.77 million homes.

“Home sales have essentially returned to — pre-pandemic — 2019 levels after two years of gangbuster performance,” NAR chief economist Lawrence Yun said in a statement.

The housing market, a crucial part of the economy, is slowing as homebuyers face significantly higher financing costs than a year ago after a rapid rise in mortgage rates. Average US long-term mortgage rates had the biggest one-week jump in 35 years as the Federal Reserve hiked interest rates by last week three quarters of a percentage point to combat the worst inflation in 40 years.

The average interest rate on a 30-year home loan climbed to 5.78% last week, the highest since November 2008, when the housing crisis was unfolding, according to mortgage buyer Freddie Mac. The Fed has signaled its intention to raise its short-term interest rate further as it tries to cool the US economy without triggering a recession.

“Today’s mortgage rates are knocking on the door of 6%,” Yun told the Associated Press. “Given these conditions, I expect further declines in home sales.”

Sales in the lower price segment are evaporating

Data from NAR showed that sales of the lowest-priced homes fell the most, pointing to price pressures on middle- and low-income buyers.

“Sales of higher-priced homes are holding up, but sales of homes under $500,000 are declining as higher interest rates drive more buyers out of the market,” said Bill Adams, Comerica Bank’s chief economist, in an email.

Some real estate trends favored buyers last month. As is usual at this time of year, the number of homes on the market increased in May from the previous month. By the end of May, around 1.16 million homes were for sale, up 12.6% from April but down 4.1% from April last year.

Even so, at the current pace of sales, the level of properties for sale amounts to 2.6 months supply, the NAR said. That’s up from 2.2 months in April and 2.5 months a year ago. That’s still not the 4 month offer that reflects a more balanced market between buyers and sellers.


30-year fixed-rate mortgages are up more than 6 percent, the biggest one-week jump in 35 years

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Yun expects the inventory of homes for sale to be up year-on-year by the fall.

This year’s decline in home sales has prompted some economists to adjust their outlook for the 2022 housing market. Realtor.com now expects U.S. home sales to fall 6.7% year over year. That would still make 2022 the second-best year for home sales since 2007, behind 2021, according to Danielle Hale, chief economist at Realtor.com.

But even with higher mortgage rates weighing on affordability, homes that were sold didn’t stay on the market for long. On average, homes were sold in just 16 days after going to market last month, the fastest sales pace tracked by the NAR. It was 17 days in April.

With inflation at a four-decade high, rising mortgage rates, high home prices and a tight supply of homes for sale, home ownership is becoming less and less accessible, especially for first-time buyers.

First-time buyers accounted for 27% of transactions, up from 28% the previous month and 31% in May last year, the NAR said.

Real estate investors and other buyers who are able to buy a home with just cash and don’t have to rely on financing accounted for 25% of all sales last month, up from 26% in April, NAR said.

CBS News’ Irina Ivanova contributed to the coverage.

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