Low inventories of affordable homes are dragging sales down as rising rates price prospective buyers out of the market
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Low inventories of moderately priced homes continue to drag home sales down, with single-family home prices increasing in 93% of measured markets in the third quarter, according to new data from the National Association of Realtors.
The national median price for an existing single-family home in the third quarter was $266,900, up 4.8% from $254,700 a year ago. Prices increased in 166 out of 178 metro areas surveyed by NAR. Eighteen metro areas saw double-digit increases.
Although prices continued to rise, low inventory is suppressing the market, according to Lawrence Yun, NAR chief economist.
“Though inventory is more than adequate on the upper-end market, the insufficient supply of low to mid-priced homes in metro markets with string job growth continues to drive up prices and push prospective buyers out of the market,” he said.
Total existing-home sales fell 2.6%, to a seasonally adjusted annual pace of 5.273 million. That’s down from 5.413 million in Q2, and 2.4% lower than the 5.403 million pace during Q3 of last year, according to NAR.
“A strong economy and consistent job growth should be driving up home sales; however, would-be homebuyers are struggling to find a home they can afford,” Yun said. “As mortgage rates continue to rise, reaching the decade’s highest rates this quarter, an increase in the supply of affordable homes has become even more important to help temper price growth across the country.”
Rising mortgage rates and home prices are even erasing gains made by rising income, NAR reported. The national family median income rose in the third quarter, but overall affordability fell because of higher mortgage rates and home prices.
“Aspiring middle-class homebuyers continue to face affordability issues, as buyers are increasingly being priced out in the West while the rest of the country struggles too,” Yun said. “The market desperately needs homebuilders to begin constructing more moderately priced single-family homes and condominiums to help satisfy demand and mitigate rapid price growth.”
