It’s Still a Home Seller’s Market

Now isn’t a great time to buy a home. Building one might be a different story.

Rising prices and interest rates make for an unwelcome combination. As of February, the National Association of Realtors’ index of housing affordability—based on prices for existing homes, 30-year fixed mortgage rates and median family incomes—was 21% below its year-earlier levelindicating the least affordable housing market since August 2008.

Since February, home values ​​have gone higher, with the median price for an existing home up 15% from a year ago in March, while the rate on a 30-year mortgage has gone from an average of 3.8% in February to 5.11% in the week ended April 21. It is likely that affordability, as the NAR calculates it, is now approaching the levels it plumbed in 2006, when the housing bubble was in full swing.

This dynamic doesn’t exactly instill confidence in the typically busy spring selling season. Indeed, on Tuesday the Commerce Department reported that new home sales last month slipped a seasonally adjusted 8.6% from February, putting them 12.6% below their year-earlier level. Wednesday, the National Association for Realtors said that its index of pending sales of existing homes fell 1.2% in March from Februarydown 8.2% from a year earlier.

Declining affordability is apparent to Americans. Households surveyed by the University of Michigan judged that conditions for buying a house in March were at the worst levels since September 1982, when the average mortgage rate was 15.4%, the unemployment rate was 10.1% and the US economy was in its deepest downturn since the Great Depression.

With the average 30-year mortgage rate rising to 5%, homeownership may now be out of reach for millions more Americans. WSJ’s Dion Rabouin explains the impact for potential buyers, sellers and the housing market. Illustration: Adele Morgan


What should home buyers look for in the current housing market? Join the conversation below.

What is striking is how tight the market is despite unfavorable affordability. This is partly attributable to the collision of the large Millennial generation reaching prime home-buying agethe increased desire for homes that the pandemic set off and low levels of new-home construction in the years since the housing bust.

Moreover, the rapid rise in rents—they were up 16.8% in March versus a year earlier, according to


—in many cases still makes buying a home a better bargain for those who can. High rents are also drawing in investorswhose home purchases are putting further constraints on supply.

It is hard to imagine home prices continuing to head skyward for long if rates continue to rise, but supply constraints could make outright price declines unlikely as well. For now, that is putting home builders in the catbird seat.

On its quarterly earnings call earlier this week, builder

D.R. Horton

said that demand remains very strong despite the rise in rates, and that it is continuing to hold off on selling homes until later in the construction cycle. Similarly,

Tri Pointe Homes

said on its earnings call that it hasn’t seen any falloff in demand.

It will take a lot of construction to bring the supply of homes back into balance with demand. Buying a home will continue to feel expensive for some time yet.

Write to Justin Lahart at

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