Key Takeaways:
- Home prices soared 6.3% in April 2024, reaching new highs.
- Half of renters and many homeowners are now “cost burdened.”
- Supply and demand imbalances keep prices high despite rising mortgage rates.
What Happened?
April 2024 saw home prices rise 6.3% compared to April 2023, according to the S&P CoreLogic Case-Shiller National Home Price Index. Home prices have now surged 47% since early 2020, with the median sale price five times the median household income. This price hike occurred despite the average 30-year fixed mortgage rate jumping from 6.9% to 7.5% in April.
Brian Luke from S&P Dow Jones Indices noted that the market is testing its resilience at an all-time high. The Harvard Joint Center for Housing Studies (HJCH) reported that half of renter households, over 22 million, spent more than 30% of their income on housing, marking a record level of cost burden.
Why It Matters?
Housing affordability is at a historic low, severely impacting both potential homebuyers and renters. For investors, this signals a stressed consumer base, which could affect overall economic stability. The imbalance in supply and demand continues to support high prices, with supply up 18% year over year but still lean compared to demand.
Zillow’s senior economist Orphe Divounguy highlighted that the rapid mortgage rate increase pushed affordability out of reach for many buyers, resulting in a rise in price cuts on listings. Despite this, well-priced homes sold swiftly, indicating strong underlying demand.
What’s Next?
As we move into the summer months, traditionally a more active period for real estate, the market’s resilience will be tested. Watch for further shifts in mortgage rates and their impact on affordability. Pay attention to the supply dynamics; although new listings are increasing, they still lag behind the strong demand.
Investors should monitor housing affordability metrics closely, as continued stress could lead to broader economic repercussions. Keep an eye on consumer behavior trends, especially how cost-burdened renters and homeowners adjust their spending, which could influence other market sectors.
