First-time home buyers were squeezed last month as prices hit a record high in April | CNN Business

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CNN
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Rising US home prices are exacerbating the housing affordability crisis for Americans, especially first-time buyers.

The median price of a previously owned home in the US rose 5.7% in April from a year earlier to $407,600, according to data from the National Association of Realtors released Wednesday. This was the fourth consecutive monthly increase and was a record for April prices.

Another price gauge from S&P Global has similarly shown that US home price growth accelerated throughout the early part of the year, particularly in San Diego, Chicago and Detroit.

Housing affordability takes into account prices, household incomes and mortgage rates. All in all, it has been a tough time for potential buyers, although rising prices have been a boon for homeowners as it means their wealth has increased.

NAR also reported that existing home sales, which make up the vast majority of transactions, fell 1.9% in April to a seasonally adjusted annual rate of 4.14 million. Sales fell in April for the second month in a row, falling across the country as mortgage rates rose above 7%.

However, one piece of good news for housing in America is that more homes are continuing to come on the market.

The high-end market is experiencing a significant gain due to more supply coming into the market, Lawrence Yun, NARs chief economist, said in a release.

He added that home prices hitting a record high for April is very good news for homeowners.

US housing markets’ recovery from the start of the year was cut short when it became clear that the Federal Reserve was unlikely to cut interest rates in the first half of 2024, just as the crucial spring home-buying season got off to a flying start. up.

After falling to multi-decade lows last fall, home sales began to rebound in early 2024 as housing supply improved and hopes rose that the Fed would start cutting interest rates immediately. Then came signs that the slowdown in inflation had stalled.

Mortgage rates track the yield on the 10-year US Treasury note, which moves in anticipation of the Fed’s interest rate decisions. Hotter-than-expected inflation readings sent bond yields higher and mortgage rates followed suit.

The benchmark 30-year fixed-rate mortgage rose 7% in April, according to Freddie Mac data. At the same time, house prices continued to rise, tightening the grip of buyers. Low housing affordability usually squeezes demand.

However, this did not deter some first-time buyers. The share of first-time home buyers rose to 33% in April from 32% in March.

I don’t know how they can do that, Yun said. Maybe we’ll find out later that they got help from family members for a down payment.

The housing market in America remains really tough for many people, but one key issue has improved this year.

A chronic shortage of available homes has long been an issue for the market, putting upward pressure on prices and limiting buyer choices. The tide seems to have turned for now.

Total housing inventory at the end of April was 1.21 million units, up 9% from last month and up 16.3% from a year ago, the NAR said. This was the fourth consecutive monthly increase in housing inventory, but it is still not in line with demand.

We still have tight inventory despite having this growth, Yun said. It’s still a very disappointing market out there. Home prices are at record highs, mortgage rates are high, and a lack of inventory to some extent appears to be holding back sales.

This story has been updated with additional details and context.