Real Estate

Home Prices Hit Record $387,600 as Inventory Lags, Pending Sales Down 4.2%

Median home price hits record $387,600 as inventory lags and mortgage rates remain high.

By Doug Elli

5/23, 14:13 EDT
article-main-img

Key Takeaway

  • The median U.S. home sale price hit a record $387,600, up 4% year-over-year, despite mortgage rates dipping to 7.02%.
  • High housing costs and insufficient inventory led to a 4.2% decline in pending home sales year-over-year.
  • Metro areas with the largest price increases include Anaheim (20.1%), Detroit (16.9%), and San Jose (12.9%).

Record High Home Prices Amid Market Struggles

The U.S. housing market has reached a new milestone, with the median home sale price hitting a record $387,600 in the four weeks ending May 19, according to Redfin. This 4% year-over-year increase comes despite a slight dip in mortgage rates, which fell from 7.22% to 7.02% at the beginning of May, as reported by Freddie Mac. The median monthly housing payment now stands at $2,854, just $20 short of April’s all-time high. This surge in prices is occurring even as pending home sales have dropped by 4.2% year-over-year, highlighting the ongoing challenges in the housing market.

The Impact of High Mortgage Rates

High mortgage rates continue to be a significant barrier for potential homebuyers. The National Association of Realtors (NAR) reported a 1.9% decline in existing home sales in April, with a seasonally adjusted annual rate of 4.14 million. This decline is largely attributed to the high borrowing costs, which have sidelined many buyers. Despite the sales slump, the median sale price of existing homes rose 5.7% year-over-year to $407,600, marking the highest price ever recorded by NAR for April. This trend underscores the affordability challenges facing buyers, particularly in a market where mortgage rates remain above 7%.

Inventory and Regional Trends

The housing market is also grappling with insufficient inventory. While new listings have risen approximately 8% compared to last year, overall inventory remains below typical spring levels. The NAR reported that for-sale inventory at the end of April rose 16.3% year-over-year to 1.21 million homes, providing a 3.5-month supply at the current sales pace. Regionally, the West saw a 2.6% monthly drop in home sales but a 1.3% annual increase, while the South experienced a 1.6% monthly and 3.1% annual decline. The Northeast recorded a 4% drop both monthly and annually, and the Midwest saw a 1% decline in both metrics.

California's Housing Market: A Microcosm

California's housing market exemplifies the broader trends affecting the U.S. housing market. The median price for a single-family home in California soared past $900,000 in April, a record high, according to the California Association of Realtors. This surge in prices has exacerbated the affordability crisis, with the number of homebuyers remaining below 300,000 for the 19th consecutive month. The high prices, coupled with a 7% interest rate, have pushed the monthly mortgage payment to $4,785, a 53% increase from previous thresholds. This situation highlights the severe affordability issues plaguing the state and, by extension, the nation.

First-Time Buyers and Market Dynamics

First-time homebuyers are particularly feeling the squeeze as home prices hit record highs. Despite the challenging conditions, the share of first-time buyers rose to 33% in April from 32% in March. NAR's chief economist, Lawrence Yun, speculated that many of these buyers might be receiving financial assistance from family members for down payments. The increase in housing inventory, while a positive development, has not kept pace with demand, leading to continued frustration among buyers. This dynamic underscores the need for more affordable housing options and potential policy interventions to address the affordability crisis.

Street Views

  • Sam Brinton, Redfin Premier agent (Neutral on the housing market):

    "Move-up buyers feel stuck because they’re ready for their next house, but it just doesn’t make financial sense to sell with current interest rates so high... Buyers should take note that many of today’s sellers are motivated; if a home doesn’t have other offers on the table, offer under asking price and/or ask for concessions because many sellers are willing to negotiate."