More Americans than ever are repelled by rising home prices
Spring is supposed to be the best season for house hunters to purchase their dream home. Instead, more than half of Americans say now isn't the right time.
A recent Gallup poll of about 1,000 U.S. adults found that just 21% of respondents believe now is a good time to buy a house. That's the fewest ever since Gallup started taking the poll in 1978.
"Opinions of the housing market are bleak and generally similar among all major subgroups, including by region, urbanicity, homeownership status, income, education and party identification," Gallup said in its poll results. "Fewer Americans now than ever before believe it is a good time to buy a house."
Gallup attributes the predominately negative view to home prices, which have been elevated for the past two years, and rising interest rates on home loans, which have more than doubled during the pandemic. The two trends have turned buying a home into a vanishing dream for millions of Americans, a recent report by Redfin shows.
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The median home sales price was $436,800 during the first quarter of 2023, according to Federal Reserve Bank of St. Louis data. That compares to $433,100 during the same period a year prior, and $369,800 during the first quarter of 2021.
Economists have said home prices are climbing for two reasons. First, homeowners have grown skittish about selling their home for fear of having to buy another property at a higher mortgage rate. Existing home sales fell 3.4% between March and April, according to the National Association of Realtors.
"In other words, most existing homeowners are not going to move unless they absolutely have to, due to death, divorce, or an irresistible job offer," Kieran Clancy, senior U.S. economist, at Pantheon Macroeconomics said in a note. "That suggests that existing home supply will remain extremely low for the foreseeable future, depressing the flow of sales and slowing the rate at which existing home prices fall."
The second reason is that homebuilders haven't finished enough new units to keep up with demand. The nation has a current shortfall of about 6.5 million homes, according to Realtor.com. The gap exists in part because homebuilders have focused more on building apartment complexes and other multifamily structures rather than single-family dwellings, Realtor.com said.
Meanwhile, the Federal Reserve continues its year-long battle against inflation, recently raising its benchmark interest rate another quarter-point higher, which has also sent mortgage rates upward. The average interest rate on a 30-year fixed home loan hit 6.35% last week, Fed data shows, compared to 5.3% a year ago and 2.94% the year before that. The Fed's move has caused rates for credit cards and auto loans to skyrocket as well.
"Because it is so expensive to borrow money, the demand for homes decreases and sellers are adjusting pricing to meet the velocity of the market," Peggy Olin, CEO of real estate brokerage firm OneWorld Properties in Florida, told CBS MoneyWatch.
Instead of the typical flourish of activity from homebuyers, this spring will likely bring lower home sales and price swings "because people are less confident in the market and less able to purchase homes," she said.
Khristopher J. BrooksKhristopher J. Brooks is a reporter for CBS MoneyWatch covering business, consumer and financial stories that range from economic inequality and housing issues to bankruptcies and the business of sports.
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