Soaring house prices have pushed the share of first-time buyers to historic lows
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Following a slight slowdown in late summer, November marked a third straight month of increases in sales of existing homes, which include single-family homes, townhouses, condominiums and co-ops. Sales increased 1.9% from October to a seasonally adjusted annual rate of 6.46 million in November. However, home sales are down 2% from a year ago, when the US real estate market saw an atypical seasonal increase in home purchases due to the pandemic.
“Determined buyers were able to secure homes before mortgage rates rose further in the coming months,” said Lawrence Yun, chief economist of the NAR.
While mortgage rates are expected to rise over the next year, Yun said he did not expect the increase to be dramatic and expects a rate of 3.7% by the end of 2022. Nonetheless, he said, “Locking in a constant mortgage and closing the payment has motivated many consumers who have grown weary of rising rents over the past year.”
Home prices continued to climb as buyers competed for a near-record home inventory. The median price of a home in November was $ 353,900, up 13.9% from a year ago. That’s 117 consecutive months of annual increases – over nine years – which is the longest streak on record.
Part of the reason the median price continues to rise is that more expensive homes are sold. Sales of homes priced between $ 750,000 and $ 1 million are up 37% from a year ago, and homes over $ 1 million are up 50%. Meanwhile, homes priced between $ 100,000 and $ 250,000 fell 19% as inventory was scarce.
Looking towards next year, Yun said that inflation and the pace of price appreciation should ease. A panel of 20 economists and housing experts convened by NAR for its recent annual housing forecast summit reached a consensus that inflation is likely to slow in 2022 to a rate of 4%, while house prices are expected to slow down in 2022 to a rate of 4%. increase at a more moderate rate of 5.7%.
âIn 2022, we expect higher rents,â Yun said. “Home prices will remain high given the inventory shortage, although prices will rise more moderately.”
Typical annual median price increases would be around 4% or 5%, normally one or two percentage points above the change in the consumer price index, Yun said. An annual increase of 13.9% is not typical, but it is a more moderate jump than the annual price increases of 20% or more seen earlier this year.
Low inventories remain the main driver of home price appreciation. At the end of November, 1.11 million homes were available, down 9.8% from October and 13.3% from a year ago. That’s less than half the historical average, said Joel Kan, associate vice president of economic and industrial forecasting for the Mortgage Bankers Association.
âBuyers continued to grab available homes, as listings for sale only lasted 18 days on the market,â Kan said. “This rapid competition continues to put upward pressure on selling prices, overall home price growth and is impacting potential first-time buyers.”
At the current rate of sales, it would take 2.1 months to sell all of the homes currently on the market. This is a decrease from the previous month and from a year ago. A more balanced market has more than six months of inventory available.
More new home completions and more people selling their homes should help inventory levels next year, Yun said, adding that since interest rates will be a bit higher, he expects fewer sales. , which could allow a less competitive and less aggressive market.
But this can be a cold comfort for first-time buyers who are increasingly excluded from the market. The share of first-time buyers in November was 26%, against 32% a year ago. It corresponds to a share not seen since January 2014, which is the lowest since NAR started tracking in 2008.
The November report shows trends continuing to push home ownership further away from first-time buyers, said Robert Frick, business economist at Navy Federal Credit Union.
âInventories are lower, especially for lower priced homes, and prices continue to rise at an annualized rate of around 15%,â he said. “The forecast calls for single-digit price increases next year, but the fundamentals of weak supply, high demand and rising consumer wealth don’t appear to be easing anytime soon.”
The decline in the share of first-time home buyers is concerning, Yun said.
âIf the new homeownership rate decreases as prices rise, we are creating a divided society,â Yun said. âPeople don’t feel like they are participating in what they see as American life by owning homeownership. All of their work to accumulate savings may seem less meaningful in the face of rising prices. ”
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