It’s still a door-to-door sellers market

Since February, home values ​​have risen, with the median price of an existing home up 15% from a year ago in March, while the rate on a 30-year mortgage rose from a average of 3.8% in February to 5.11% in March. the week ended on April 21. It is likely that affordability, as calculated by the NAR, is now approaching levels reached in 2006, when the housing bubble was in full swing.

This dynamic doesn’t exactly inspire confidence in the usually busy spring selling season. Indeed, on Tuesday, the Commerce Department reported that new home sales last month fell a seasonally-adjusted 8.6% from February, putting them 12.6% below their US level. last year. On Wednesday, the National Association for Realtors said its index of pending sales of existing homes fell 1.2% in March compared to Februarydown 8.2% from the previous year.

The decline in affordability is obvious to Americans. Households surveyed by the University of Michigan estimated home buying conditions in March were the worst since September 1982, when the average mortgage rate was 15.4%, the unemployment rate was 10, 1% and the US economy was in its deepest recession since The Great Depression.

What is striking is how tight the market is despite unfavorable affordability. This is in part due to the collision of the large millennial generation reaching home-buying age, the increased desire for homes that the pandemic has triggered, and low levels of new home construction in the years that follow. followed the housing collapse.

Plus, rapidly rising rents — they were up 16.8% in March from a year earlier, according to Zillow — in many cases still make buying a home a better deal for those who can. High rents also attract investors, whose real estate purchases impose additional constraints on supply.

It’s hard to imagine home prices continuing to skyrocket for long if rates continue to rise, but supply constraints could also make a price drop unlikely. For now, that’s putting homebuilders in the catbird seat.

On its quarterly earnings call earlier this week, builder DR Horton said demand remains very strong despite rising rates and it continues to delay home sales until later in the construction cycle. . Similarly, Tri Pointe Homes said on its earnings call that it saw no decline in demand.

It will take a lot of construction to rebalance housing supply with demand. Buying a home will continue to seem expensive for some time to come.

Write to Justin Lahart at justin.lahart@wsj.com