The real estate market in most parts of the United States continues to be a seller’s market, with home prices continuing to rise, making it increasingly difficult for average Americans to afford a home.
According to the National Association of Realtors (NAR), in May, the national average price for existing single-family homes hit a record high of $419,300.
Jessica Lautz, Vice President of Demographics and Behavioral Insights at NAR, mentioned in an interview with Epoch Times that due to low inventory and high demand for homes, they predict that home prices will continue to rise.
With a $400,000 house, a buyer typically needs a $40,000 down payment, which is usually 10% of the purchase price. Lautz stated, “For first-time home buyers, this is a significant amount of money, meaning they may sometimes have to borrow from parents or friends to achieve this goal.”
NAR reported that in May, the volume of existing home sales decreased by 2.8% compared to the same period last year, while unsold inventory of existing homes increased by 6.7% from the previous month.
Furthermore, 30% of homes were sold above the asking price, with bidding wars still ongoing, typically receiving three competing offers per property.
In May, only the Midwest region saw a slight increase in home sales, up by 1% compared to the same period last year. The median sales price in the Midwest was the lowest at $317,100, representing a 6% increase from the previous year.
Comparing to May 2023, the Northeast experienced the largest drop in existing home sales by 4%. The median sales price rose to $479,200, a 9.2% increase from the previous year.
The South and West regions saw a decline of 1.6% and 1.3% in home sales respectively. The median sales price in the South rose by 3.6% to $375,300, while in the West, it increased by 5.5% to $632,900 compared to 2023.
First-time home buyers are now required to wait longer to purchase a home. Last year, the average age of these buyers was 35. Although some buyers are waiting for prices or mortgage rates to drop, Lautz predicts that rates may remain between 6% and 7% by the end of this year.
According to data from Freddie Mac, the current 30-year fixed-rate mortgage is around 6.95%.
“If mortgage rates do significantly drop, more buyers entering the market could trigger more bidding wars,” said Lautz. “I think rates of 2% to 3% are rare experiences, and I don’t expect to see them again in the short term. But historically, our current rates are still at a lower level.”
Many home sellers are engaging in all-cash transactions for their next purchase. In fact, NAR stated that 28% of all buyers last month did not use a loan.
Dutch Mendenhall, founder of the real estate investment trust RAD Diversified based in Tampa, Florida, also believes that given the current market conditions, home prices will remain stable.
He told Epoch Times, “I don’t think we will see a sharp decline in home prices like in 2008. We have more oversight now, and lending practices are more cautious. I don’t anticipate any market crash or slowdown.”
Mendenhall echoed Lautz’s concerns, pointing out that the shortage of new homes is contributing to the lack of inventory, further driving up prices.
He explained, “Higher rates also impact construction loans, with many builders unable to afford the costs of large residential development projects. New development projects will not inflate prices – they will create more affordable housing.”
Despite the rising prices and rates leading to buyers paying double what they would have two years ago, people are still buying homes.
“The most common buyers are young couples starting families, as well as retirees downsizing to smaller homes or moving to new locations,” he said.
“While sales have slowed somewhat in the first half of the year, I believe as we move towards 2025, the real estate market will begin to improve,” Mendenhall added.
Matt Willer, Managing Director and Partner at Phoenix Capital Group Holdings, also agrees that even in such a tight real estate market, a “bubble burst” is unlikely.
He told Epoch Times, “I think we may eventually see some softening in certain markets, while others may not experience it at all.”
Willer emphasized that everything now depends on affordability. “People have been accustomed to rates of 3% to 4%, and the mindset now is that those unwilling to sell and buy at higher rates will stay put and renovate their existing homes.”
Willer believes that rates will remain in the range of 6% to 7% in 2024 and early 2025. “I don’t expect any substantial changes before the elections, and rates may slightly decrease by the end of the year.”
Regarding the housing shortage issue, Willer thinks that the construction industry is cyclical, but builders are cautious about the amount of debt they take on and may not want to exceed their budget. He mentioned, “I believe we currently cannot solve this problem.”
Meanwhile, rental markets in many cities are thriving, with many potential home buyers opting to rent before making a purchase.
“For first-time home buyers, this is undoubtedly a challenge, as some are content with renting,” Willer said. “They find renting less stressful, with lower management fees, and greater freedom to live wherever they want.”
The National Association of Realtors predicts that the seller’s market may continue through 2025.
“Many low-rate borrowers are still ‘locked in,’ unwilling or unable to refinance at higher rates. Additionally, the severe shortage of new homes means it will take several years of housing construction to create a fair competitive environment,” she explained.
Mendenhall suggested that those looking to buy homes should do more research to find affordable options. “Of course, you have to consider factors like crime rates, but if you don’t have children, you may not need to live in a top school district, or you could consider a smaller house or apartment.” “If you’re willing to commute from the city to further out, you may find more choices,” he added.
His advice to those capable of buying property is to take action now. “If you wait, the house might be gone, or rates could rise again,” he said. “I believe eventually loans will become cheaper, and by then, homeowners can get lower rates through refinancing.”