Rising prices and a shortage of available homes are starting to hold back the blazing US housing market.
Existing home sales fell 2.7 percent in April, the National Association of Realtors said on Friday. It was the third straight monthly decline following a surge in transactions at the start of the pandemic.
Mortgage rates have risen since the beginning of the year, which has likely weighed heavily on demand. However, the main force holding back sales isn't the lack of willing buyers. They lack houses to buy – especially at prices they can afford.
The median sales price of an existing home was $ 341,600 in April, up 19.1 percent year over year. Both the price and the surge were record highs. The number of homes in the market rose in April but declined 20.5 percent year over year and remained near a record low.
As a result, home competition can be intense. The brokers said 88 percent of the homes sold in April had been on the market for less than a month. A quarter of the buyers paid in cash. At Redfin, the online broker, half of all homes sold in the past few weeks have sold more than the asking price, up from about a quarter of a year earlier.
"Even if demand falls, supply is the problem, and until we see more homes hit the market, it will limit sales," said Glenn Kelman, CEO of Redfin. "When you meet a new buyer, you almost say good luck."
The increase in remote working during the pandemic has resulted in an increase in the demand for housing, especially outside city centers. That demand has remained as the economy began to reopen, even as millions of millennials reach the age when Americans have historically tried to buy houses. However, the combination of high prices and limited inventory make it particularly difficult for young people to get into the housing market.
"First-time buyers in particular are struggling to secure that first home for a variety of reasons, including insufficient affordable housing, competition with cash buyers, and properties that are leaving the market so quickly," said Lawrence Yun, chief economist for the National Association of Realtors, said in an explanation.