HOUSTON – (By Dale King, Realty News Report) – The monthly cost of owning a home has surged this year, decelerating existing home sales to the slowest pace in more than two years, says a research brief drafted this month by Institutional Property Advisors, part of Marcus & Millichap Real Estate Investment Services Inc.
Home sales declined in July for the fourth consecutive month, and were down 1.4% from a year ago. August home sales were flat. Lawrence Yun, NAR chief economist, says the decline in existing home sales appears to have hit a plateau with robust regional sales, indicating the downward trend may have hit a plateau. “With inventory stabilizing and modestly rising, buyers appear ready to step back into the market,” Yun said.
The IPA report raises concerns about affordability in the modern housing market as well as the continuing popularity of renting versus purchasing a home.
Monthly housing payments for householders spiked this year as mortgage rate increases and rising home prices hiked the cost of homeownership.
The monthly payment on a median-priced home now stands $130 higher than at the beginning of the year, driven by a 70-basis-point interest rate increase. Fixed-rate mortgages now average about 4.5%, their highest level since 2011. This has increased the gap between the monthly mortgage payment on a median-priced home and the average monthly apartment rent to $320 in favor of renting.
The report says the shortage of entry-level homes for sale has been amplified by rapid interest-rate increases. Move-up buyers have become more reluctant to sell their existing home because many homeowners locked in rates as low as 2%. With interest rates now as much as 250 basis points higher, purchasing power and affordability have been impacted.