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Home prices are still hitting new highs, but the pace of appreciation is not likely to continue, Lawrence Yun, chief economist at the National Association of REALTORS®, said in an interview on CNBC’s “Power Lunch” on Tuesday. The housing market has been showing signs of softening as rising mortgage rates add to already higher prices.
“It’s just inevitable that home price appreciation will slow down in the upcoming months,” Yun told CNBC.
Pending contracts and new-home sales are dropping to pre-pandemic levels of sales activity, following a massive jump in the past two years, Yun says.
Home listings rose 9% last week compared to a year ago, CNBC says. “The worst of the housing shortage is coming to an end, and that should be welcome news,” Yun says. “Consumers were chasing after limited choices.” The tight supply had also driven the spike in bidding wars and rising home prices. As more choices arrive on the market, the price pressure will lessen, Yun says.
Buyers may get more choices, but now they’re up against higher mortgage rates, which have increased borrowing costs considerably over the last few weeks—and by more than 25% compared to last year. In many cases, that could mean the higher mortgage payments will cost $500 more per month for borrowers. The 30-year fixed-rate mortgage averaged 5.10% last week compared to 2.95% a year earlier, Freddie Mac reports.
Despite rising costs and some signs of a market slowdown, Yun says that homes are still selling fast. Eighty-eight percent of homes sold in April were on the market for less than a month, according to NAR data. But Yun says home sellers do need to be realistic with their asking prices, as mispriced homes will linger on the market. A few weeks ago, sellers may have been able to list their homes 20% above what they could have a year ago, but now it may be 10% to 15% above a year ago. “Sellers must clearly recognize that higher mortgage rates are squeezing away some buyers,” Yun says, adding that homeowners are still seeing appreciation nonetheless.
The median existing-home sales price increased at a slower year-over-year pace of 14.8% in April, NAR’s most recent data. The median home price nationally was $391,200.