Glimmers of a More Affordable Home Market Spotted in New Data

Existing home sales continued to slow—returning to 2019 levels—in May while sales prices continued their upward climb, according to the National Association of Realtors.

NAR also reported that the median sales price topped $400,000 for the first time. At $407,600, that represents a 14.8% increase from one year ago and made it an ongoing record 123 consecutive months of year-over-year increases.

NAR Chief Economist Lawrence Yun commented on the recurring trends, including four consecutive months of sales declines.

This comes after “two years of gangbuster performance,” he said in prepared remarks, adding, “the market movements of single-family and condominium sales are nearly equal, possibly implying that the preference towards suburban living over city life that had been present over the past two years is fading with a return to pre-pandemic conditions.”

Further sales declines should be expected in the upcoming months given housing affordability challenges from the sharp rise in mortgage rates this year, Yun added.

“Nonetheless, homes priced appropriately are selling quickly and inventory levels still need to rise substantially—almost doubling—to cool home price appreciation and provide more options for home buyers.”

Nothing Mysterious Here 

“In terms of home sales declining and the median home price rising, there is nothing mysterious here,” Jeff Benach, principal of Lexington Homes, tells GlobeSt.com. “As rates have shot up, traffic has slowed, and buyers have backed off. The price has been rising with new construction for two reasons: demand/availability and building costs. As both are receding now, look for prices to stop rising.”

Greg Phillips, chief technology officer at Houwzer tells GlobeSt.com that home sales are declining due to the affordability factor, especially with the rising mortgage rates. 

“We’ve gone from a typical 30-year fixed mortgage of just under 3% to around 6% in less than a year,” Phillips said. “The median home prices for all house types have hit an all-time time high in most markets. Given how few houses are available compared to the number of buyers still looking for a home to buy, neither a balanced market nor price decreases are a guarantee, or even necessarily probable, despite consumer perceptions.”

Date the Rate, Marry the Home

Still some observers see the glimmers of an affordable housing market starting to take shape. “Maybe we have found the tipping point of affordability,” Seth Bellas, manager, Churchill Mortgage, tells GlobeSt.com. “Appreciation will slow dramatically as the market softens and the average seller can’t sell for $25,000 to $100,000 over their asking price like the past couple of years. 

“I keep telling buyers that higher rates also mean fewer buyers and that you date the rate but marry the home. The focus should be on the fact that over a 60-year period, homeownership has proven to be a significant wealth-building tool and with rents also skyrocketing, owning a home is still the best option for many.”

What Slowdown? 

Meanwhile, signs of slowing sales are not so apparent in many markets, such as Chicago. John Matthews, senior vice president of residential sales at Chicago-based brokerage Baird & Warner, tells GlobeSt.com that homes in the area are still moving quickly despite high prices and rates.

“Although down from last year’s historical highs, homes are still selling at an incredible pace, buyer demand remains high despite rising interest rates, and we’re seeing correctly priced homes still receive multiple offers,” Matthews said.

Year-to-date through May, 46,000 homes sold in the Chicago area, which historically is the second-highest number behind only 2021, when roughly 51,000 homes sold during that period.