My July 2022 post, More Cracks in the Housing Market, pointed out that new home sales fell in five of the first six months of the year but went on to state that the weakness in sales had not yet impacted prices. Well, the most recent report from Redfin indicates that the average home sold for less than the asking price for the first time since March of 2021.
Moreover, the real estate website Zillow reported that overall home prices fell in July for the first time in a decade.
The dynamics here are relatively straightforward. The average 30 year mortgage rate just reached 5.89%, the highest level since 2008, and the price of the average home has risen 34% over the past two years. According to Redfin, this combination results in an increase in the monthly mortgage payment for the median home to $2,306 versus $1,665 one year ago, an increase of 39%. During the same period, personal income is up only 4.6% indicating that housing affordability has been severely challenged.