Home Prices Plunge
With all eyes on tech and the banking industry, some have forgotten the woes that have inflicted the housing market. As the pandemic ended, Americans continued to work from home and created a new, long-lasting value to their properties. Then, with inflation reaching 40-year highs in 2021, borrowing costs began to become higher, diminishing the average demand for citizens to purchase and sell their homes. With the average 30-year fixed rate mortgage hovering between 6% and 7% throughout the past few months, it was implied sales would reach lower levels as demand continued its decline.
In the month of April, this lower demand was verified to be true, where existing sales fell month-over-month by 3.4%, and year-over-year by 23.2%. With such lower demand, prices also fell, with the national median existing-home price falling 1.7% from a year earlier, the largest yearly decline since January 2012. However, when breaking down the regions of the US, a different story is told. In Western markets, prices continued to decline contributing to the national median, but Eastern markets remain to show signs of rise due to the abundance of metropolitan areas. Regardless, there were 1.04 million homes available for sale at the end of April, but the number of new listings fell 21% from a year earlier. As the year continues, investors should pay close attention to the state and fragility of the current housing market as it can be a bellwether to economic activity and chances of a recession.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
