T
he housing market has stalled this year, with high prices and elevated mortgage rates deterring many would-be buyers. Despite hitting an all-time high in June, the median price for an existing home sold was $435,300, while sales numbers were at a nine-month low. According to Jessica Lautz, deputy chief economist at the National Association of Realtors, "Today's housing market is really haves and have-nots." Those with significant equity can afford high prices, but many others are being priced out.
The strongest part of the market is the high end, where homes above $1 million saw a 14% sales spike last month. All-cash buyers made up 29% of transactions, while first-time and middle-income buyers struggle to compete. Home price growth has slowed, but the median price is now 48% higher than it was five years ago.
High mortgage rates are a major deterrent for would-be buyers, particularly those trying to enter the market as first-time homebuyers. Each percentage point increase in interest can add hundreds of dollars to monthly payments, making it difficult for many to afford homes. Mortgage rates are also discouraging people from selling their homes, with some opting to stay put due to lower-interest-rate mortgages.
Ironically, if mortgage rates were to drop, demand would likely surge and home prices could rise even further, making it harder for first-time buyers to compete. Redfin's analysis found that 30 out of 50 metros saw price declines, with the biggest drops in Washington, D.C., Austin, Texas, and San Diego.
New-home sales were up slightly last month but down nearly 7% compared to a year earlier, reflecting weak buyer demand due to challenging affordability conditions. New homes are now often cheaper than existing ones, with a median sales price of $401,800 – nearly $40,000 less than the median existing single-family home. Homebuilders are building smaller houses and offering incentives like price cuts to meet demand, but elevated interest rates are also making it more expensive to build new homes, which could impact housing prices in the future.
