Apr 23, 2021 - Economy & Business

U.S. housing market sees eroding affordability

Data: Investing.com, YCharts; Chart: Axios Visuals
Data: Investing.com, YCharts; Chart: Axios Visuals

Sales of existing homes fell 3.7% in March to a seasonally adjusted annualized 6.01 million units, the National Association of Realtors reported Thursday, the second straight monthly decline and the slowest sales pace since August. Go deeper (<1 min. read)

Yes, but: The median sales price for an existing U.S. home rose to a new record high of $329,100.

What it means: Dwindling supply and continued demand are sending prices higher and pushing more buyers out of the market, even as rates stall and begin to decline.

  • Homes sold in an average of just 18 days last month, NAR says, eclipsing the previous record fast pace seen in February.

Don't sleep: Since October, prices have risen by 5% while sales have fallen by 12%, according to an Axios analysis of NAR's data.

  • Since the start of the year, the divergence has been even more pronounced. Total sales have fallen by 10.2% since January, while prices have increased by 8.4%.

What to watch: Skyrocketing prices have put the market on a record pace and the Mortgage Bankers Association expects purchase originations to reach an all-time high of $1.67 trillion this year, even as they predict purchase volumes will decline by 14%.

  • MBA expects mortgage rates to continue rising to around 3.7% this year, contributing to a further slowdown in refinance demand.
  • Refinance originations are expected to fall by 33% to $1.62 trillion.

The bottom line: “The widening imbalance of supply and demand is driving up home-price growth and eroding affordability – especially for entry-level buyers,” Mike Fratantoni, MBA's chief economist and senior vice president for research and industry technology, says in a statement.

  • "[T]his environment sets the stage for higher mortgage rates and faster inflation."
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