Homebuyers are entering the most competitive spring market in decades, with affordability being the largest hurdle. The national median sale price of a single-family home advanced almost 15% in just the last few months of 2020, says the Associated Press. The median home price sits at $315,900—four times the U.S. median family income of $77,774. Many homebuyers have searched for a property for months, with few options and even fewer affordable ones. In some areas, such as Los Angeles and Boulder, Colo., home prices are nearly double the national average. It’s especially difficult for first-time buyers who hope to take advantage of relatively low—but rising—mortgage rates, yet have no funds from selling a house to bolster their offers.
So, from Los Angeles to Boston, those homes on the market are selling in a heartbeat, often fetching multiple offers well above what the owner is asking. A surge in millennials eager to become homeowners, plus a growing number of people who work remotely and are able to move to more affordable areas, are expected to keep the market running hot.
Homebuyers still have low mortgage rates on their side, providing them with a measure of financial flexibility, though rates have been creeping higher. The average rate on the benchmark 30-year loan moved above the 3% mark early last month for the first time since July 2020. It stood at 3.13% this week, according to mortgage buyer Freddie Mac, though that’s still down from 3.33% a year ago.
“We expect homebuyer demand to remain strong this spring, but it will be tested by higher mortgage rates,” said Danielle Hale, chief economist at Realtor.com.