American Dream Distant: Owning a Home Becomes a Challenge for Average Americans

The dream of owning a home in the United States is becoming increasingly unaffordable. More and more households simply cannot afford to buy their own homes.

This is well illustrated by the affordability index compiled by the National Association of Realtors (NAR). Currently, it is below 96 points, which is the lowest level in 40 years.

Perhaps the affordability issue is the reason for the decline in home sales in the US primary market. According to data from the US Census Bureau, the number of transactions for new homes declined by 4.7% in April.

Meanwhile, in the secondary market, 20% fewer homes are being sold in the US compared to before the pandemic. This volume has remained constant for the past two years.

Since spring 2022, approximately 320,000 to 380,000 homes have been sold per month in the US secondary market, according to NAR statistics. This range is roughly equivalent to the levels observed during the pandemic downturn in spring 2020.

In contrast, prior to the pandemic in 2019, around 415,000 to 465,000 homes were sold per month. Therefore, during the years 2022-2024, there were approximately 20% fewer home sales compared to 2019.

Although the volume of sales has significantly decreased, it has not resulted in a decline in prices. In April 2024, the median price of homes in the US secondary market was $407,600.

In February 2020, just a month before the outbreak of the pandemic, the median price of homes in the US secondary market was $270,400.

Thus, in just over four years, the median price of homes in the US secondary market has increased by 51%. Meanwhile, in April 2024, the number of transactions was 26% lower.

How is this possible? Americans do not want to sell their homes because mortgages for purchasing new properties are heavily burdened with interest rates. The average interest rate for a 30-year mortgage in the US exceeds 7%. In the fall of 2023, it was close to 8%.

As a result, supply is greatly limited, while demand remains strong. With rising housing prices, many people are investing in real estate in hopes of further price increases.

The high interest rates on mortgages certainly contribute to weak sales results. Although interest rates have remained below the 8% level observed briefly in October 2023, they are still above 7%. Combined with near-record high prices, this means that affordability challenges remain discouraging for homebuyers, as stated in a recent Bankrate analysis.

The sharp increase in mortgage interest rates observed in the fall of last year has deterred many homeowners from selling, leaving existing homes off the market. Those who took out a loan with an interest rate of 3% a few years ago are not willing to move with the current interest rate more than twice as high, said economist Max Slyusarchuk from A&D Mortgage.

The unaffordability of homeownership in the United States has become a growing concern. According to the National Association of Realtors (NAR), the affordability index is currently below 96 points, the lowest level in 40 years. This has led to a decline in home sales in both the primary and secondary markets.

In April, the US Census Bureau reported a 4.7% decrease in transactions for new homes. Additionally, the secondary market has seen a 20% decline in home sales compared to pre-pandemic levels. Despite this decrease in sales volume, home prices have continued to rise.

The median price of homes in the US secondary market was $407,600 in April 2024, a 51% increase from February 2020. This rise in prices can be attributed to the limited supply of homes for sale and strong demand. Many homeowners are hesitant to sell their properties due to high mortgage interest rates.

The average interest rate for a 30-year mortgage in the US exceeds 7%, reaching close to 8% in the fall of 2023. These high interest rates have discouraged homeowners from selling, further limiting the housing supply. The combination of elevated interest rates and record-high prices poses affordability challenges for potential homebuyers.

Despite a slight decrease from the peak in 2023, interest rates above 7% continue to impact the housing market. Many homeowners who secured loans at rates around 3% in previous years are reluctant to move with interest rates more than twice as high. As a result, the supply of existing homes on the market remains limited.

This combination of factors has created a situation where demand remains strong, but supply is constrained, driving up housing prices. With the hope of capitalizing on further price increases, many individuals are investing in real estate. However, the affordability challenges associated with high mortgage interest rates persist, making it difficult for prospective homebuyers to enter the market.

It is important for policymakers and industry stakeholders to address these issues related to affordability and housing supply. By focusing on strategies to increase housing affordability and alleviate the burden of high interest rates, it may be possible to make homeownership more accessible for Americans.

The source of the article is from the blog cheap-sound.com