Rejoice current US homeowners: Median home prices hit a new April record last month, near $408,000.
Despair would-be US homeowners: Median home prices hit a new April record last month, up near $408,000.
The latest NAR existing home sales report, released on Wednesday, found prices posting a 10th consecutive YoY gain. Property values rose nearly 6% from April of last year. The 5.7% 12-month increase counted as the briskest since October of 2022.
NAR chief economist Lawrence Yun celebrated the gains. “Home prices reaching a record high for the month of April is very good news for homeowners,” he said.
It’s great that we’re minting home equity millionaires. Really it is. It’s fun to pretend. I do it all the time. So do a lot of you. If you bring in triple your monthly expenses, are free from variable-rate debt, are heavily-banked, have good credit and own property, you’re in a good spot.
If that’s you congratulations: You’re de facto rich. There’s probably still a lot you can’t actually afford (defined as something you can buy several times over, in cash, without missing the money), but there’s not a lot you can’t at least pretend to afford (defined as something you can easily and quickly finance). Barring some manner of personal disaster that isn’t covered by an insurance policy, that charade can, and probably will, last in perpetuity.
But here’s the thing. That’s not a majority. Most people don’t bring in triple their monthly expenses. Most people live paycheck to paycheck, or in similar circumstances. A lot of people have variable-rate debt (America’s stock of credit card debt stood at $1.12 trillion as of Q1 2024). Not everyone has good credit. Many people are under-banked and some are completely un-banked. And not everyone owns property.
Given the link between property ownership and the capacity to build wealth, obtain credit and insulate yourself from the rising cost of shelter, it’s reasonable to assess that the number of people who check all of the de facto rich boxes will decline as a share of the total over time as property ownership becomes increasingly unattainable. That spiral’s deleterious to societal cohesion. As such, we arguably shouldn’t celebrate ever higher home prices, or at least not openly and proudly.
In the resale market, a big part of the problem’s obviously inventory. Specifically, there isn’t enough of it. That’s a function of high rates, which are disincentivizing sellers. High rates are discouraging buyers too, but it’s painfully obvious that the inflationary impact of handcuffed supply is far outstripping any disinflationary impulse from constrained demand. In other words: By keeping rates high, the Fed’s contributing to shelter inflation. It’s not a debate at this point.
Wednesday’s NAR data showed inventories rose meaningfully (9%) in April from March and more than 16% from a year ago. But as Redfin’s Lily Katz noted, “new listings were at the lowest level on record aside from the start of the pandemic [last April] which is one reason they’re now posting such a large YoY gain.” On the NAR’s measure, months’ supply was 3.5 last month, up from 3.2 in March and from just 3.0 a year ago.
In aggregate, the NAR’s sales measure unexpectedly slipped for a second month to a 4.14 million annual pace. Consensus expected a small gain.
The 1.9% decline came on the heels of a 3.7% drop in March. Like 2023, 2024 began with consecutive gains. And just like 2023, those increases now look like a false dawn.
In a testament to constrained resale supply, more than a third of listings were new construction in Q1, according to Redfin’s data. The high was 34.5% in Q1 of 2022. Do note: That share peaked at 17.5% just prior to the subprime bust, troughed around 6% in 2011 and stood at roughly 17.5% on the eve of the pandemic. New construction’s share of the market has no precedent. Or no modern precedent anyway.
Redfin’s Dana Anderson quoted an agent in Orlando. “We have a fair amount of new-construction homes for sale, and thank goodness we do,” she said. “Buyers are having a hard time finding single-family homes in their budget because not many homeowners are letting go of their houses, and those who are listing tend to price high because they haven’t come to terms with the fact that prices have come down from their 2022 peak.”
And yet, last week’s housing data saw builder sentiment retreat back below a key threshold separating net optimism from pessimism, while new construction data disappointed. Suffice to say builders, like buyers and sellers, have had enough of high rates. If that source of incremental supply dissipates, prices will go higher still.
Mercifully, mortgage rates fell a third week on the MBA’s index, as Treasury yields retreated from YTD highs. 7.01% counted as a seven-week low on the 30-year fixed. “Rates coming down from recent highs spurred some borrowers to act [but] purchase activity continues to lag, as potential buyers still face limited for-sale inventory and high list prices,” MBA VP Joel Kan said Wednesday.
On the bright side, there’s one corner of the market where supply’s rising rapidly, helping to facilitate sales. “Home sales changed little overall, but the upper-end market is experiencing a sizable gain due to more supply coming onto the market,” a chipper-sounding Yun remarked, adding that “for homes priced $1 million or more, inventory and sales increased by 34% and 40%, respectively.”
