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According to the S&P Case-Shiller index, home prices increased for a third consecutive month in April
Home prices, after peaking in June '22, fell until Jan '23 but are steadily recovering. April '23 prices were 0.2% lower YOY, but up 0.5% MOM, standing just 2.4% below June '22 peak. Cities like Miami, Chicago, Atlanta saw significant gains; while 17 out of 20 index cities saw larger price drops than in Mar '23. A surge in mortgage rates impacted prices, with the rates still being high. Craig Lazzara of S&P DJI backs the recovery trend. Despite high interest rates, buyers are active. Limited inventory & low sale willingness among existing owners keep the competition high, notes Danielle Hale, Realtor.com.
3 reasons why renting can be more advantageous even if you have the means to buy
While homeownership is a staple of the American dream, buying a home isn't always the wisest move. Jude Boudreaux, senior financial planner, asserts that not everyone needs to own a home. Reasons not to buy include uncertainty about long-term living plans. Renting offers flexibility, crucial if you're uncertain about a location, says Kamila Elliott, CFP. Ownership costs like maintenance and taxes add to financial burdens, and tax breaks for homeowners aren't as lucrative as they once were. Additionally, returns on investment in housing and stocks have varied historically, with stocks often providing better net returns.
Demand for mortgages is rising, driven by sales of new homes
Despite a rise in mortgage rates, mortgage application volume rose 3% last week, driven by demand for newly built homes, reports the Mortgage Bankers Association. Applications for home purchase were up 3% but down 21% YoY, and have been rising for three weeks. New home sales are driving demand as potential sellers hold onto lower-rate mortgages. Average interest rate for 30-year fixed-rate mortgages increased to 6.75% and for jumbo loans to 6.91%. The spread has widened due to recent regional bank failures, pushing rates up. Applications to refinance rose 3% but were 32% lower YoY.
Finding a home is already difficult. What's this? It's going to get harder soon
Home availability on the resale market is dwindling with listings falling below year-ago levels for the first time in 59 weeks, down 29% in the last week of June. Rising mortgage rates, crossing 7%, leave homeowners reluctant to sell, majority having sub-4% rates. This tightened market implies stable home prices despite them having peaked last June. "The ongoing recovery in home prices is broadly based", says Craig Lazzara, S&P DJI's managing director. Despite falling pending sales, homebuilders are benefiting from this shortage, with sales up 12% in May. However, home building remains below historical levels.
