Is homeownership on its way to becoming the exclusive province of the wealthy? One expert says that the latest sales data paints a troubling picture.
Sales figures saw a sharp decline in January, with existing-home sales slipping 3.2% – the largest annual decline in more than three years. But according to journalist and real estate expert Diana Olick, there’s an ominous trend driving that drop.
“The sharp drop in January home sales was not due to a shortage of homes for sale,” Olick wrote for CNBC. “It was due to a shortage of affordable homes for sale.”
Olick said that while many real estate economists blamed the “pitiful” 3.4-month supply of total listings, it was necessary to break down sales by price point to truly get the big picture.
Most sales declined year over year in January – but the difference between the declines in more expensive and less expensive homes was dramatic. According to the National Association of Realtors, sales of homes priced between $100,000 and $250,000 dropped a little more than 2% annually – while sales of homes priced between $500,000 and $750,000 actually spiked 12%. Meanwhile, sales of homes priced below $100,000 tumbled 13%. The share of first-time homebuyers also fell, dropping to 29% from 33% in January of 2017.
“Affordable inventory has been more depleted than expected, and the upcoming spring homebuying season will likely be filled with bidding wars and multiple offers,” Joe Kirchner, senior economist at Realtor.com, told CNBC.
Meanwhile, there seems to be more than enough half-million-dollar homes to go around.
“That’s a problem, because higher price points are not where the bulk of buyers exist and especially not where most first-time buyers exist,” Olick wrote. “If you look at sales distribution, about 55 percent of buyers are in the below $250,000 category. Just 13 percent are above $750,000.”
Even worse, most new-home builders don’t live in the “$250,000 and below” space these days, thanks to rising construction costs. The median price of a newly built home is about $335,000, according to the Census Bureau. And rising mortgage rates are becoming a problem for first-time buyers as well, Olick wrote.
“Higher mortgage rates erode affordability further,” she wrote. “Not only to they make monthly payments higher, but for those on the margins of qualifying, higher rates may cut them out altogether.”
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