What Buyers are Finding as they Resume Their Hunt for Homes
Folks who delayed homebuying plans in 2022 have apparently grown more comfortable with current mortgage rates and are snooping around…according to Realtors and builders.
Unfortunately, they’re finding that just over 1 million existing homes were for sale, or under contract, in May 2022, the lowest level for that month since 1999, according to the National Association of Realtors. Thus, buying a newly built home versus waiting for a used one to appear out of the mist might be more in the cards for young families in today’s housing market.
New homes accounted for 33% of single-family units for sale in May…compared to the historical norm of 10-20%. However, builders aren’t constructing enough new houses to offset the shortage of existing homes, which means that in many markets, potential buyers still face (horror) bidding wars. This is despite the fact that interest rates have risen to their highest level this year.
The average rate for a 30-year fixed mortgage was 6.96% as of July 13, the highest since November 2022, according to Freddie Mac.
So, has the homebuilding industry already experienced its recession? Some investors think so. The S&P Homebuilders Select Industry stock index is up 39.8% this year as of July 18. The S&P 500’s gain was about half (18.6%) on the same date. The three largest home builders in America performed even better than 40%.
Nationally, the portion of new homes sold in May for under $300,000 rose to 17%...the highest since December 2021. It seems that the buyers are reappearing, but there’s simply not sufficient homes available – new or used – to meet the growing demand.
Add to that, federal student-loan payments resume this fall. This will, no doubt, make it more difficult for first-time buyers – largely the younger Millennial and Gen Z crowds – to save for those onerous down payments.