The housing market in the United States stands to welcome approximately 4 million new potential buyers this year if mortgage rates decrease by one percentage point, according to recent data from the National Association of Home Builders (NAHB).
Despite ongoing challenges like high mortgage rates and soaring home prices due to persistent inflation, there are signs of hope for Americans aspiring to purchase a home.
Currently, about 27.5 million households can afford a new home at the median price with a 7.25 percent mortgage rate. However, NAHB estimates that an additional 4.5 million households would become able to afford homeownership if mortgage rates dropped to 6.25 percent. This shift would increase the number of households capable of purchasing a home to 32 million.
Housing industry experts are cautiously optimistic that the 30-year mortgage rate could reach 6.25 percent by year-end, pending actions taken by the Federal Reserve to manage inflation.
As of today, there is an approximate shortage of 1.5 million housing units in the U.S., based on current median home prices and interest rates. This shortfall could potentially be reduced if cities invest more in affordable housing initiatives or if the Fed decides to lower interest rates.
According to a recent Fannie Mae National Housing Survey, only 21 percent of Americans believe it’s a favorable time to buy a home. This sentiment comes amid a significant increase in home prices, with the S&P CoreLogic Case-Shiller Home Price Index reporting a 6.38 percent rise in February.
In certain real estate markets where home prices have skyrocketed, there are indications of declining buyer demand. For instance, Florida witnessed a median sale price surge to $404,100 in January, representing a 4.5 percent year-over-year increase, according to Redfin. Despite these price hikes, several cities in Florida, including Jacksonville and Miami, experienced declines in home sales by notable percentages.
Nationally, median home prices either increased or remained stable in the top 50 metro areas leading up to April 28, presenting significant affordability challenges for low-income and middle-class buyers.
While there are concerns about a potential housing market downturn in the months ahead, experts like Boyd, specializing in corporate site selection, don’t foresee substantial mortgage rate reductions on the horizon.
