Home prices across the United States rose by 1.5% year-on-year in January, while the number of homes sold dropped by 34.2% and the number of homes for sale increased by 17.3%. These figures can provide insight into whether homes remain on the market or are selling faster than sellers put them up for sale. The sudden surge in interest rates has put a strain on the housing market after home prices hit record highs across the country last year. After a few years of rapid growth, it appears that home prices are slowing down, making it difficult for many homebuyers to find affordable housing.
The direction and speed at which the housing supply changes can indicate whether buyers have more or fewer options. To find the MSA's annual Home Affordability Index, check out the data from the “Housing Affordability Index”. Additionally, with mortgage rates exceeding 6%, there is less incentive for people to list their current homes since many are staying put. The National Association of Realtors (NAR) produces housing statistics at the national, regional and metropolitan market levels when data is available. Due to the inventory problem that keeps house prices high, many economists predict that the housing market is more likely to correct itself after the double-digit percentage increases seen in house prices in recent years rather than falling.
This means that homeowners still have equity in their homes and are not underwater when they owe more than what their house is worth. The direction and rate at which home prices change are indicators of the strength of the housing market and whether homes are becoming more or less affordable. If your plans for this year include buying or selling a home, it's important to be aware that housing market conditions can change quickly from month to month. A low or decreasing percentage of homes that sell above list price suggests that the market is becoming less competitive. Although rates stabilized during January, causing some homebuyers to re-enter the market, a recent increase in rates suggests that the market is stagnating again. On one hand, there is still a limited total housing supply in the country as those who bought homes in recent years with extremely low mortgage rates stay put.
The Home Affordability Index measures whether or not a typical family earns enough income to qualify for a mortgage loan for a typical home at both national and regional levels, based on recent monthly price and income data. In case of a fall in the housing market, there would usually be a 20 to 30% drop in home prices and a much greater drop in home sales than what is currently happening. Therefore, if you are planning to buy or sell a home this year, it's best to proceed with caution as housing market conditions can change rapidly.
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