Despite rising mortgage rates in the United States, housing prices in the United States remain high.
Many analysts who invest in the real estate market expect that house price growth may reverse, or at least slow down, in the next year or two due to falling demand for housing.
U.S. housing prices have not been affected by deflation . The main reason is that the U.S. housing supply is limited and real estate construction has slowed down.
In the first half of 2022, despite the Federal Reserve taking a series of tightening measures, housing prices in the United States remain high. Even as mortgage rates have risen to their highest levels in more than a decade, U.S. home prices have continued to trend higher so far this year. So why are housing prices in the United States so expensive now?
The current situation of the U.S. real estate market is largely due to the imbalance between housing supply and demand. A simple and obvious phenomenon is that the construction rate of new homes in the United States is not fast enough to meet the market demand, and there are not enough houses for home buyers to purchase. In fact, the current supply of housing available for sale in the United States is only enough to sell for two months. That is, based on the past sales rate, the existing pre-sales of new homes are only enough to sell for two months, while the supply before the epidemic was enough to sell six months. moon.
But rising mortgage rates are sharply depressing housing demand. The number of mortgage loan applications has dropped by more than 50% so far this year, mainly due to high loan interest rates. Many economists believe continued pressure on mortgage rates could rebalance the housing market enough to cause home prices to fall, or at least to slow their growth.
Although interest rates are high and housing demand has declined, why do house prices remain high?
In May, the median U.S. home price exceeded $400,000 for the first time, reaching $407,600, while 30-year fixed mortgage rates hovered around 6%. It's a confusing phenomenon even for many real estate agents, as home sales continue to decline month after month while home prices continue to rise.
In the past few years, an ample supply of homes has caused prospective homebuyers to flock to the real estate market. The United States immediately slowed down the pace of new home construction after the outbreak. In fact, after the real estate market crashed in 2008, the pace of home construction in the United States had already begun to slow down. The cooling agents that have cooled the housing market so quickly have yet to really take effect as the most determined buyers are holding out despite less-than-optimal conditions.
It is predicted that the pent-up demand for housing will subside, or at least be alleviated, over time, and there are already signs of a catch-up between supply and demand. Nearly 20% of home sellers lowered their asking prices in the four weeks to May 22, the highest monthly share since 2019. Even so, existing home sales (which are declining) are mostly selling for more than asking price.
Ali Wolf, chief analyst of the real estate market research agency Zonda, recently commented on the U.S. real estate market: "We are at an inflection point in the real estate market. There are preliminary signs that some fundamental factors are weakening, such as the increase in the number of houses with price reductions, The share of new home construction halts is rising, and more loan officers are reporting that homebuyers are starting to take the plunge.”
For more information on investment in the U.S. real estate market, welcome to review:
“Forecast of U.S. housing price trends: Is the real estate market still worth investing in?”
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Author: Ling Gu. Weibucompiled by: Cai Caijun
