The price of a single-family US home has surpassed $400,000 for the first time, according to the National Association of Realtors (NAR).
The second quarter of this year saw a 14.2% rise in the price of single-family US homes compared with the same period last year to stand at $413,500. That’s above the current inflation rate of 8.5% and the rate of wage growth of 10.25%.
“Home prices have increased at a pace that far exceeds wage gains, especially for low- and middle-income workers,” said Lawrence Yun, chief economist at NAR.
“The local job market performance and supply availability are the clear distinguishing factors driving local home price growth,” Yun added. US job market data stunned investors this month after job creation surged past economists expectations in July.
The US economy added 528,000 nonfarm payrolls last month suggesting job growth is rebounding. “Job growth is positive and should be applauded, but supply restraints are creating unnecessary barriers to ownership opportunities,” Yun said.
He continued. “Overall, the national price deceleration inevitably followed the softening sales, providing well-positioned prospective buyers a small measure of welcomed relief. The recent dips in mortgage rates will bring additional buyers to the market, especially in those places where home prices are still relatively affordable and where jobs are being added.”
But Americans haven’t felt this gloomy about the housing market since 2011. The Fannie Mae Home Purchase Sentiment Index fell 2.0 points in July to 62.8%, its lowest in a decade, with only 17% of surveyed consumers saying it’s a good time to buy a home in the current economic climate.
The housing market has dented by Federal Reserve ramping up interest rates to ward off inflation. Borrowing costs have become more expensive thus, reducing Americans’ homeownership affordability in recent times.
To that effect, an economist told Insider that house prices are about to tumble as demand for new houses “craters.” That mindset follows a drop in US mortgage applications which plummeted to their lowest level since 2000 in the week to July 15, creating more housing availability relative to the number of buyers, meaning prices are likely to fall sharply.