US home sales drop for 3rd straight month, mortgage rates rise sharply

May 21, 2022 12:54 AM AEST | By Team Kalkine Media

US home sales drop for 3rd straight month, mortgage rates rise sharply — Image source: © Paul65516 | Megapixl.com

Home prices remain costly

The average price of homes in April jumped to a record high of US$391,000, which is 14.8% higher than in 2021, the report said, citing the National Association of Realtors (NAR). There have been few high-end listings for the month, and more mid-sized homes have entered the market. Leaping prices have raised the mortgage rate.

The steep rise in home prices has jeopardized the home-buying decisions of people. They feel the pinch from both sides as high mortgage rates squeeze budgets. First-time buyers have their budgets shrink further with rapid rent growth and four-decade high inflation. Homebuyers are dealing with the highest lending rate since 2008.

At the start of this year, the 30-year fixed mortgage - the most popular home loan people take to purchase homes - was 3.22%. This week it hit 5.25% on Thursday, slightly below last week’s 5.3%.

People are also reluctant to sell, leading to a shortage of properties in the market for buyers. The number of unsold units also remains high. At the end of April 2022, it reached 1.03 million.

Even builders face hardships in continuing with the current market scenario. Supply chain disruption, high input costs, and dwindling demand (as buyers couldn’t afford it) have also cornered them in the current situation.

Bottom line:

During the two years of the pandemic, the home buying market remained frenzied, sending home values soaring. However, it shows signs of cooling off due to high mortgage rates.

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