Reduced buying power due to rising interest rates and inflation is being blamed for the 9.7% drop in home sales in June, with July expected to follow suit, but competition for homes remains strong. Read the entire housing report below….
HOME SALES FINALLY SLOWING
Incredibly strong demand has fueled home sales in central Ohio for the last decade, however rising interest rates and inflation have started to take their toll on sales this year.
June home sales dropped 9.7 percent last month and are now 2.4 percent behind the first six months of 2021. Pending sales in June were down almost 14 percent suggesting that July sales will also see a year over year decline.
“Higher interest rates and inflation along with escalating home prices are all working in combination to reduce buying power,” said Sue Van Woerkom, 2022 President of Columbus REALTORS®. “Being able to afford less house today than you could six months ago is quite a shock so home buyers have a lot to consider right now.”
Despite these obstacles, competition for homes remains fierce as two thirds of the homes sold in the second quarter this year had buyers paying more than the advertised list price.
All cash sales continue to rise as buyers compete for available homes. Although conventional financing has declined slightly, the number of buyers using FHA financing has dropped considerably over the last decade.
FHA loans have been attractive for first-time and lower-income buyers because they come with lenient credit requirements, low closing costs and competitive interest rates. The added expense of FHA mortgage insurance, however, is a key drawback to this avenue of financing.
For conventional loans backed by Fannie Mae and Freddie Mac, private mortgage insurance is not required once the homeowner’s equity reaches 80 percent. In the case of an FHA loan, mortgage insurance could be required for the life of the loan, regardless of equity.
“Buyers who are making an offer using FHA or VA financing have found it increasingly difficult to compete against buyers who are offering cash or using conventional financing,” said Van Woerkom.
“Government insured loans could have stricter requirements and, on average, may take a little longer to close. While having more relaxed credit requirements, when it comes time to decide which offer to accept, sellers might want to take these factors into consideration.”
The median price of a home sold during the first half of 2022 was $287,500, up 14.5 percent from a year earlier. The average price of $330,002 marked a 12.7 percent increase. The average sales price is the total volume divided by the number of homes sold. The median is the midpoint — half the homes sell for less, while half sell for more.
Homes in the higher price ranges have been gaining market share due to the lack of homes available in the more affordable price ranges.
The time it takes to sell a home is largely determined by its price. It’s going to take a little longer to sell a luxury home than a home more attainably priced. Even so, homes in all price ranges have been selling in record time this year.
Columbus REALTORS® is comprised of almost 10,000 real estate professionals engaged in residential sales and leasing, commercial sales and leasing, property management, appraisal, consultation, real estate syndication, land development and more.
The Columbus REALTORS® Multiple Listing Service (MLS) serves all of Franklin, Delaware, Fayette, Licking, Madison, Marion, Morrow, Pickaway and Union Counties and parts of Athens, Champaign, Clark, Clinton, Fairfield, Hocking, Knox, Logan, Muskingum, Perry and Ross counties.