The Federal Housing Finance Agency (FHFA) reported that year-over-year house prices climbed 6.7% in March, down from February’s 7.1%. Meanwhile, sales of existing homes, which dominate the US housing market, dropped as the average 30-year fixed-rate mortgage hovered near 7%.
This trend underscores the pressure high borrowing costs are placing on potential homebuyers. Still, house prices remain elevated as limited inventory – still below pre-pandemic levels – continues propping up values.
Notably, prices surged 6.6% in Q1 2024 compared to the same period in 2023 and rose 1.1% from Q4 2023. Consequently, the FHFA suggests that constrained housing supply is sustaining higher prices despite waning demand.
Persistently high house prices, driven by scarce inventory even as mortgage rates near 7%, signal ongoing challenges for housing affordability and market stability. Investors should watch for potential impacts on related sectors, such as real estate investment trusts (REITs) and construction firms, which could see varying effects depending on market dynamics.
Slowing house price growth may have broader economic implications, including impacts on consumer spending and overall housing market stability. As housing costs consume a greater share of income, consumer expenditure on other goods and services may decline, potentially slowing economic growth. Additionally, the ongoing housing inventory crunch underscores a critical need for policy initiatives to boost home building and address affordability issues
