Home prices in the United States have risen due to a decrease in available properties for sale compared to previous years. According to real estate brokerage Redfin, prices increased by 0.5 percent in September compared to August, marking the fastest pace since April. On an annual basis, prices were up by 6 percent. The lack of supply to meet the demand has been a key factor in the continuous uptick in home prices.
Redfin senior economist Sheharyar Bokhari noted that there are around 20 percent fewer homes on the market now than there were five years ago. Many homeowners locked in low mortgage rates during the pandemic, contributing to the scarcity of available properties. With mortgage rates currently above 6 percent and unlikely to drop below 6 percent this year, home prices are expected to continue increasing until more inventory becomes available in the spring.
Despite the rise in mortgage rates, potential homebuyers can benefit from rates being lower by more than a percentage point compared to the previous year. Freddie Mac chief economist Sam Khater highlighted the positive impact of lower rates on mortgage applications for new home purchases, which increased by over 10 percent in September compared to the previous year, according to the Mortgage Bankers Association.
Additionally, there has been an increase in newly built options coming onto the market, making it more attractive for prospective buyers to make a purchase. Joel Kan, deputy chief economist at the MBA, emphasized the appeal of these new options in the current market environment.
While builder sentiment improved in October, the number of housing starts declined on both a monthly and yearly basis, according to data from the U.S. Census Bureau. Housing starts for single units saw positive growth, particularly in the Northeast, while starts for five or more units experienced a decline.
Looking ahead, builders expect mortgage rates to moderate in the coming months, with inflation easing. Despite affordability challenges, builders are feeling more optimistic about market conditions for 2025. The National Association of Home Builders emphasizes the importance of supply-side solutions to address the housing crisis and expects mortgage rates to decline in the coming quarters, boosting housing demand.
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