Home prices are soaring, with the median price for existing homes in March from a year earlier to $375,000.
That’s the highest level since the National Association of Realtors (NAR) began tracking the data in 1999.
If home prices keep rising and demand for homes remain strong, the Federal Reserve may have to raise interest rates even further, .
“They [Fed officials] are not going to get the decline in economic activity through housing that they typically get, at least not as quickly as they typically get it,” Mark Zandi, chief economist for Moody’s Analytics, told Bloomberg. “They may have to press on the brakes even harder.”
To be sure, there are already signs that the housing market is cooling. The rising prices, combined with surging mortgage rates, helped push existing home sales down 2.7% in March from February and down 4.5% from a year ago.
As for mortgage rates, the 30-year fixed-rate averaged 4.17% in March, up from 3.76% in February, according to mortgage agency Freddie Mac.
And that rate has continued to climb since then, in the week ended April 28. That’s down just slightly from the prior week’s 12-year high of 5.11%. The rate was 2.98% a year ago.1.2% in March, the fifth monthly drop in a row. Pending sales, which are measured for existing homes, slid 8.2% from a year earlier.
A sale is pending when the contract has been signed but the transaction hasn’t closed. The sale is usually finalized within one or two months of signing. So pending sales are a good indicator for actual future sales.
"The falling contract signings are implying that multiple offers will soon dissipate and be replaced by much calmer and normalized market conditions," Lawrence Yun, the NAR's chief economist said in a statement., citing a Federal Reserve study.