An all time high of Americans spend more than half or more of their income on rent
An all time high of Americans spend more than half or more of their income on rent, per NYT.
The average monthly mortgage payment is a whopping 52% higher than the average monthly rent on a house or apartment, the highest amount since the 2008 housing crash, per WSJ.
Most US mortgages are at rates below 4%, per Bloomberg.
Many Americans who desire to relocate are confined to their current homes due to "golden handcuffs" – the dilemma of low interest rates they can't afford to give up. This phenomenon is causing a shortage of homes for sale, intensifying market competition and driving prices higher than anticipated.
This reluctance of homeowners to sell distinguishes the current housing market from past economic downturns and may prevent a significant nationwide drop in home prices, potentially hindering the Federal Reserve's attempts to curb inflation by cooling the economy.
In April, the number of homes available for sale was approximately half of what it was in April 2019, although there were more listings than in April 2022 when they reached record lows, as reported by Realtor.com.
The number of newly listed homes in April decreased by around 21% compared to the previous year, indicating that sellers are holding back even during the typically bustling spring home-buying season. Mortgage rates have discouraged many potential buyers from entering the market.
In March, the median sale price for existing homes experienced a 0.9% decrease from the previous year, according to the National Association of Realtors. Concurrently, existing-home sales plummeted by 22% in March year-over-year.
Lawrence Yun, NAR's chief economist, described this as a "unique market condition," with lower sales and even declining prices in some areas, yet buyers still struggle to secure homes due to fierce competition with other buyers.
Frenzied bidding wars persist in various parts of the country, especially for moderately priced homes that attract first-time buyers. For instance, a two-family house listed at $449,000 in Clifton, N.J., received 120 offers in six days and is now under contract for about $150,000 over the asking price.
A healthy housing market typically maintains between four and six months of supply at current sales rates. In contrast, the existing-home market, representing a significant portion of the housing market, reached a record low of 1.6 months' supply in January 2022 and stood at 2.6 months' supply in March of the current year, according to NAR. The new-home market is comparatively better supplied, with a seasonally adjusted 7.6 months' supply in March, according to the Commerce Department.
This housing scarcity benefits home builders, who grappled with finding customers in much of 2022 as mortgage rates increased. However, they have reported stronger-than-expected demand in the first quarter of the current year. Newly constructed homes constituted about one-third of the total single-family homes available for sale in March, up from the historical norm of 10% to 20%.
In an April earnings call, Jessica Hansen, Vice President of Investor Relations and Communications at D.R. Horton, the largest home builder by volume, stated, "If somebody does want a home at [either higher or lower price points], new construction is where they can find it right now."
Read more: https://unusualwhales.com/news/most-us-mortgages-are-at-rates-below-4-2