FROM MONEY .COM:
Soaring mortgage rates, tremendous demand and limited inventory are pushing home prices up, but some experts say relief is on the way. Just not in the near future.
Home prices grew 20.6% year-over-year in March, the fastest annual surge in 35 years, according to a report released Tuesday by S&P Global. In some cities, that number is even higher: Tampa (34.8%), Phoenix (32.4%) and Miami (32.0%) saw the largest price gains.
The data, which comes from S&P’s CoreLogic Case-Shiller Index, tracks the value of single-family housing in the U.S.
It gets reported on a two-month delay, and prices continued to rise beyond the month of March, albeit at a slower pace. The median sales price of an existing home (not new construction) in April was $391,200, according to data from the National Association of Realtors (NAR). That’s 14.8% higher than in April 2021.
Experts generally agree that prices this high, combined with mortgage rates above 5% and soaring inflation, are not sustainable in the long term, since they price so many buyers out of the market. Soon, sellers will have to adjust.
“As buyer confidence sags and weighs down demand, real estate markets will re-balance, eventually tilting away from the heavy advantage that recent home sellers have enjoyed,” Realtor.com Chief Economist Danielle Hale wrote in a blog post this week.
When will home prices fall?
Because mortgage rates are so high, the monthly payment on a home listed at the median asking price was $2,425 during that same period — $717 higher than a year prior.
Buyers looking for newly built homes also face historically high construction costs thanks to supply chain issues and material shortages.
Mark Zandi, the chief economist at Moody’s Analytics, predicts prices will eventually flatten across most of the country, especially in the hottest housing markets of the pandemic era — like Boise, Colorado Springs, Las Vegas and Phoenix.
“Sky-rocketing house prices are set to come back to earth as higher rates crush affordability,” Zandi tweeted last week.
For now, those waiting to buy until the market cools will have to keep biding their time.
“Although one can safely predict that price gains will begin to decelerate, the timing of the deceleration is a more difficult call,” Craig Lazzara, Managing Director at S&P Dow Jones Indices, said in a news release.
Written by Sarah Hansen for Money.com: