Sales of new homes fell in April for the fourth month in a row, approaching the levels of the COVID-19 pandemic.
First-time home buyers could benefit, according to housing experts. The process just requires a little patience.
"It is entirely possible that prices level out and just don't change very much for the next few years," said Greg McBride, chief financial analyst at Bankrate.com.
"This would benefit first-time buyers by allowing their incomes to 'catch-up' to the cost of homeownership somewhat, but this would unfold over a two- to four-year period, not the next two-to-four months."
The United States incurred a two-year surge in home prices during the COVID-19 pandemic.
Around that time, home prices were affected by rising interest rates, an inventory shortage of quality homes, inflation impacting the cost of materials, "and a volatile stock market" in which the Dow Jones teetered between 13,000 and 34,000 points in less than 24 months.
Rod Smyth, chairman of the board at RiverFront Investment Group, a global asset manager, believes housing prices are generally approaching a peak.
"However, due to strong supply/demand conditions, we believe most markets are more likely to 'rust' than 'bust,'" says Smyth. "By rust, we mean that nominal prices [not adjusted for inflation] could decline somewhat or stagnate around current levels for several years."
According to a YouGov.com poll of 1,000 adults, just 6% of homeowners said their homes decreased in value last year.
In the interim, this means affordability could be a challenge for first-time buyers, says CBS MarketWatch.
The median sales price of houses was $428,700 in the first quarter of 2022, up 30% from $329,000 in the first quarter of 2020.
Mortgage rates also jumped from 2.75% last fall to a 30-year fixed rate of 5.25%.
Redfin estimates that 8.2% of homes are currently valued at $1 million or higher, equivalent to 6 million properties.
That's markedly higher than the 2020 count of 3.5 million homes possessing million-dollar values, or 4.8% of the nation’s housing stock.
"Sellers have been putting homes on the market and asking for moonshot prices," said McBride. "In a neighborhood where homes were selling for $600,000 one year ago, a seller may now be asking $800,000. Sure, they may need to cut the price a bit and eventually sell for say, $725,000, but that is still much higher than the $600,000 it would’ve sold for one year ago."
As Greg Handler, head of mortgage and consumer credit at Western Asset Management, told MarketWatch: "Can you actually see a correction, or an overcorrection? I think there’s obviously some risk of that."
"Fixed mortgage rates have leveled off recently to a range of 5.25% to 5.50%, after increasing about 1.25 points since late March," says Bob Griffith, general manager of home services at Houwzer Mortgage, a Philadelphia-based real-estate and mortgage brokerage firm.
"And last week, we saw indications that home prices may stabilize, as the inventory of homes for sale grew and the percentage of homes bought for less than list price increased. These developments, if they continue, will help new buyers looking to enter the housing market."
More positive data: More than half (58%) of Americans own a home, and nearly 30% reported outright home ownership, YouGov's poll also found.
U.S. Census Bureau five-year estimates, published in 2020, found a slightly higher share of owner-occupied units — 38% — own their home outright.
What does it all mean for the under-40 crowd of prospective home buyers?
"Rising home prices and a record-low inventory of affordable housing for sale have also impeded homeownership," according to a Freddie Mac report on millennial homeownership from last year.
"On the other hand, as more millennials reach age 40, their household formation rate will accelerate due to higher marriage rates and more stable incomes."
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