Chief Economist Yun said in an interview that it’s “just inevitable that home price appreciation will slow down in the upcoming months.”
WASHINGTON – Home prices are still hitting new highs, but the pace of appreciation is not likely to continue, Lawrence Yun, chief economist at the National Association of Realtors®, (NAR) said in an interview on CNBC’s “Power Lunch.”
“It’s just inevitable that home price appreciation will slow down in the upcoming months,” Yun says.
The housing market has shown signs of softening as rising mortgage rates add to already higher housing prices. Pending contracts and new-home sales are also dropping to pre-pandemic levels of sales activity, following a massive jump in the past two years, Yun says.
Pending sales hit slowest pace in nearly a decade
Home listings rose 9% last week compared to a year ago.
“The worst of the housing shortage is coming to an end, and that should be welcome news,” Yun says. “Consumers were chasing after limited choices.” The tight supply had also driven a spike in bidding wars and rising home prices. As more choices arrive on the market, the price pressure will lessen, Yun adds.
Buyers may get more choices, but now they’re up against higher mortgage rates, which have increased borrowing costs considerably over the last few weeks – and by more than 25% compared to last year. In many cases, that could mean the higher mortgage payments will cost $500 more per month for borrowers. The 30-year fixed-rate mortgage averaged 5.09% this week compared to 2.99% a year earlier, Freddie Mac reports.
Despite rising costs and some signs of a market slowdown, Yun says that homes are still selling fast: 88% of homes sold in April were on the market for less than a month, according to NAR.
Yun says home sellers must be realistic with their asking prices, as mispriced homes will linger on the market. A few weeks ago, sellers may have been able to list their homes 20% above what they could have a year ago, but now it may be 10% to 15%.
“Sellers must clearly recognize that higher mortgage rates are squeezing away some buyers,” Yun says, but homeowners are still seeing appreciation.
The median existing-home sales price increased at a slower year-over-year pace of 14.8% in April, according to NAR’s most recent data. The median home price nationally was $391,200.
Source: “It’s Inevitable Home Price Appreciation Will Slow in the Coming Months, Says Lawrence Yun,” CNBC (May 31, 2022)
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