The housing market is stuck thanks to high prices, high mortgage rates, and low inventory.UCG / Getty Contributor
Low inventory, high mortgage rates, and high prices have created a difficult housing market.
Homeowners have seen equity climb, but house hunters are having a hard time breaking into the market.
Purchases by real estate investors plunged 45% in the second quarter compared to last year.
It’s a tough time to be navigating the US housing market.
The Federal Reserve’s aggressive interest rate hikes over the last 18 months have led to mortgage rates hovering around two-decade highs, but so far home prices haven’t fallen as they usually do when rates climb.
Throw in distorted supply and demand dynamics and economists see little reason to expect easing affordability. Current homeowners are reluctant to move and risk giving up lower rates they secured before, and that keeps homes off the market and leaves buyers with fewer options.
As things stand, roughly one-quarter of homeowners are sitting on mortgage rates of less than 3%, near the highest on record.
High home prices
The Case-Shiller US National Composite Home Price Index showed home prices climbed for the fifth straight month in June, and now the index is just 0.02% below the all-time high reached last summer. The seasonally-adjusted data showed prices climbed in every single city in the group’s 20-city index.
“As we’ve noted previously, the recovery in home prices is broadly based,” Craig J. Lazzara, managing director at S&P DJI, said. “Over the last 12 months, 10 cities show positive returns. Otherwise said, half the cities in our sample now sit at all-time high prices.”
A recent Redfin survey found that young adults in particular are