The decade's most triggering comedy
The typical home in the United States sold for approximately $350,200 in February 2023, marking a 0.6% decline since the same month last year, according to data released on Thursday by real estate brokerage Redfin. The typical monthly mortgage payment has nevertheless surpassed $2,500 as interest rates rise across the economy.
“Prices falling from a year ago is a milestone because it hasn’t happened since the housing market was recovering from the 2008 subprime mortgage crisis. But it’s not surprising and in many ways, it’s welcome,” Redfin Deputy Chief Economist Taylor Marr commented. “Home prices skyrocketed so much over the last few years that they were likely to come down once rates rose from historic lows. Mortgage rates rising to the 7% range was the straw that broke the camel’s back, dampening homebuying demand and leading to sellers asking less for their home.”
Rates for a 30-year fixed mortgage approached 6.7% as of March 2023 after nearing 7.1% in November 2022, according to data from government-backed mortgage company Freddie Mac. Mortgage rates generally remained below 3% during the lockdown-induced recession but started to rise as the Federal Reserve hiked the target federal funds rate to combat inflationary pressures, thereby applying upward pressure to interest rates.
Median home sale prices previously increased from $322,600 in the second quarter of 2020 to $467,700 in the fourth quarter of 2022, according to data from the Department of Housing and Urban Development. Costs plateaued in the second half of last year as mortgage rates soared.
Homeowners who acquired mortgages at low rates over the past several years have reason to avoid selling their properties, a phenomenon which could further limit the number of houses on the market and decrease affordability for buyers. Redfin noted that mortgage applications have now declined to their lowest levels in three decades.
“Prices will probably decline a bit more in the coming months, but first-time buyers hoping to score a major deal this year are likely out of luck,” Marr continued. “That’s because so few homeowners are listing their homes for sale. Limited inventory and continued interest in turnkey homes in desirable neighborhoods will keep prices somewhat propped up, and high rates will continue to be a hit on affordability.”
The housing market had witnessed a shortage of 3.8 million houses as of 2019, according to data from government-backed mortgage company Fannie Mae. The National Association of Realtors estimates that homebuilders should have constructed between 5.5 million and 6.8 million more houses over the past two decades to match current demand.
Members of the Senate Banking Committee drew attention to the phenomenon during their first hearing of the new Congress last month, calling for federal action to remove barriers that prevent home construction. “There just isn’t enough quality housing at prices that people can afford,” Sen. Sherrod Brown (D-OH) said in his opening statement. “And because there aren’t enough homes, renters, and homeowners are stuck paying more every month or living with peeling lead paint or leaks.”