For the third consecutive month home sales have taken a hit. The Pending Home Sales Index, a figure based on home contract signings, is 1.7 percent lower than this time a year ago, marking the second year of decline. The cause behind this trend is the lack of affordable houses on the market. Low inventory levels cause prices to rise, forcing many buyers out of prospective homes. The housing shortage hits neighborhoods in the lower price range the hardest. Homes under $100,000 were listed 7.2 percent less than last year and house sales under $250,000 rose a mere 2 percent from June 2016. While the lower end market has been struggling, houses over $750,000 have seen a 26 percent increase in sales, and homes over $1 million fared even better with a 29.1 percent increase. The National Association of Realtors conducted their quarterly Housing Opportunities and Market Experience (HOME) study, finding that weaker financial and economic confidence is a contributor to the slowdown of real estate sales. They discovered that respondents were overall less confident about their own finances and the economy than earlier this year, leading to a lack of interest in buying now.
According to statistics from May 2017, the median listing price of homes in the United States was $275,000. At the end of May there were 1.5 million active home listings, 11 percent fewer than last year, and houses were on the market for an average of only 60 days. Nationally, home prices have been rising every month over the past five years. While good news for sellers, buyers are having a difficult time finding homes within their budget. With the choice in the market being so slim, people are reluctant to list their houses out of fear they won’t be able to purchase another within their price range. As a result, many individuals looking to move choose to rent out their home instead of selling. However, rents have also been a victim of the housing shortage and have been steadily rising. The one consolation to buyers is the current mortgage rates. Even though the Federal Reserve recently announced they were raising interest rates, mortgages have been hovering below 4 percent. As of June 15, 2017, the average rate of a thirty year mortgage was 3.9 percent. While looking optimistic for the near future, interest rates are expected to gradually go up, and buyers may see the rates begin to rise by the end of this year.
Vasel, Kathryn. “Home Prices Are Sky High, But Mortgages Are Still Cheap.” money.cnn.com. 23 June 2017. Web. Accessed 29 June 2017.