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The median selling price of a U.S. home in this year’s second quarter jumped 14.2 percent, year over year, to $413,500, according to the National Association of Realtors (NAR).

The median price was higher in 184 of the 185 metro areas the NAR monitors. Prices slipped 0.7 percent in Trenton, N.J.

In 80 percent of the metro areas, prices were up more than 10 percent on an annual basis, compared with 70 percent a year earlier.

Prices rose the most in Fayetteville, Ark., rocketing up 32.6 percent from the second quarter last year.

The typical monthly mortgage payment for a home selling at the median price was $1,841 in the last quarter, compared to $1,229 in the same quarter in 2021.

The median price has been pushed up by several factors.

New home construction had slowed due to shortages of materials, labor, and available land, as we have noted in “Lumber Prices Add $36,000 to Cost of New Home” (4 May 2021), “Home Prices Set Yet Another Record While Sales Fall” (26 Apr 2022) and “Housing Market Leading U.S. Toward Recession, NAHB Chief Says” (2 Aug 2022), among other articles.

Yet, these trends are reversing, and the number of homes for sale has remained near record lows for several months.

Also, large numbers of modest- and middle-income buyers have been priced out of the market, leaving most home sales to occur in the market’s higher price ranges, which skews the perception of home values upward.

“Home prices have increased at a pace that far exceeds wage gains, especially for low- and middle-income workers,” NAR chief economist Lawrence Yun told The Wall Street Journal.

The national average rate for a 30-year, fixed-rate mortgage was 5.22 percent last week, the Federal Home Loan Mortgage Corporation, down from June’s peak of 5.81 but above last week’s average, when rates briefly slipped below 5 percent.

A year earlier, the average rate was 2.87 percent.

TREND FORECAST: Home prices have peaked and will decelerate. With inflation and mortgage interest rates rising in tandem, less homes will be purchased, and home prices will continue their downward trend.  Rising interest rates and the high costs of labor, material, and land on which to build new homes will prevent the home construction industry’s economic recovery this year.

However, well-off households and private equity investors will continue buying what houses do become available, keeping the market alive.

As we have reported extensively in past articles, much of the industry’s purchases have been made by private equity firms. They have swooped into the housing market in the last two years, buying not only individual houses but also contracting to buy entire tracts of new housing that they can rent at premium prices.

As those premium prices continue to shut first-time and modest-to-middle-income buyers out of the market, private equity investors will continue to play a large role in shaping the U.S. housing market, creating entire communities of renters and foreclosing the dream of home ownership on generations of Americans.

For our past coverage of private equity’s U.S. home invasion, see:

TREND FORECAST: Supporting our trend forecasts of a housing slowdown, today CNBC, citing Johns Burns Real Estate Consulting, reported that homebuilder cancellations doubled since April, with 17.6 percent of contracts falling though in July. To put the number into perspective, just 7.5 percent of these contracts fell through in July 2021. 

The Commerce Department also announced today that housing construction is down more than 8 percent from last year. Some of the reasons that the housing market has cooled is due to rising mortgage rates and higher construction costs.  

Therefore, considering the socioeconomic and geopolitical facts and data, the worst of the housing slump is yet to come. 

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