Americans have turned against the idea that they should buy homes, for now. Results of a new Gallup poll reported in “Record Low in U.S. Say It Is a Good Time to Buy a House” show that “Thirty percent of U.S. adults say it is a good time to buy a house, down 23 percentage points from a year ago and the first time the figure has been below 50%.”
What happened to the housing boom, which was fueled in large part by tremendous demand? Two things, most likely. Home prices continue to surge, and mortgage rates have soared in just a few months.
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The housing boom was triggered by several factors. The first was a desire, driven to some extent by the COVID-19 pandemic, to move from big expensive coastal cities to more affordable ones inland. Home prices in New York and San Francisco have been two to three times the median price of an existing home, which itself has surged to over $350,000.
Ironically, the move to smaller cities has pushed up prices in them at breathtaking paces. While home prices, on average, across the United States have risen by about 20% each month recently, compared to the same month in 2021, in cities like Boise and Phoenix, that number is much higher. The Gallup poll showed many people believe these price increases will continue.
Another reason home demand rose was another effect of the pandemic. Millions of Americans became more mobile as the work from home movement grew due to offices shut down because of the spread of the virus.
Mortgage rates were at historic lows as recently as a year ago. At that point, 30-year fixed mortgages carried interest rates below 3%. That figure moved above 5% recently, as the Federal Reserve has pushed up rates. The central bank just increased the federal funds rate by another 0.5%.
What will the result of this new pullback in the perception of home buying be? According to Gallup, “Americans’ much more negative assessments of the current housing market may also keep them from looking to buy, which could lead to a slowdown in home sales.” Maybe.
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