BofA Securities provided an update on U.S. housing midway through the spring home buying season, examining how home buyers and sellers are performing. They note that although inventories are increasing, monthly supply remains stable, indicating that supply is being absorbed by demand. At the same time, high interest rates and tight lending conditions continue to pose challenges for potential buyers.
While mortgage rates and affordability may have improved compared to last year, rates above 7% continue to disappoint buyers, BofA said. “Due to high home prices and elevated mortgage rates, consumers continue to believe now is not the best time to buy a home,” the analysts wrote in a note.
The latest University of Michigan survey shows that 76% of respondents believe now is not the best time to buy a home, up from 74% in March, with high interest rates and tight lending conditions (57%) and high home prices cited as the main reasons. housing. (54%).
However, in a seller’s market, 61% of respondents believe now is a good time to sell, with high prices and good availability being the main reason for 46% of them.
As for inventories, they have increased, BofA notes, and may force builders to be more cautious.
“However, elevated price-to-rent ratios continue to indicate a strong return on capital for new housing developments. We believe the contribution of housing investment to real GDP growth should slow, but we do not expect housing construction to decline,” the analysts added.
The monthly supply of new homes fell from 8.8 months in February to 8.3 months in March, indicating that despite rising inventories, “supply is quickly being overwhelmed by strong demand.” This trend is also observed in the existing domestic market.
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All things considered, BofA believes the housing market is “a story of improving supply and robust demand.”
“As more supply comes into the market and mortgage rates remain stable, affordability should also gradually improve. “We expect the Fed’s first rate cut to come in December, which should provide further relief for both buyers and sellers going forward,” the analysts added.