Home buyers still face tough challenges in today's housing market: steep prices, elevated mortgage rates and a shortage of homes for sale.
But the feverish home-buying competition of the last couple of years has cooled a bit. There are fewer bidding wars, and buyers have more room to negotiate.
Here's how things have changed in recent months and how to navigate the market in the last half of 2022.
More homes for sale, but supply still low
A shortage of homes has fueled fiery competition among buyers in the last few years. But the supply improved as summer began.
The number of homes for sale increased nationwide by 9.6% in June over the previous month, reaching a three-month supply, versus 2.6 months in May and 2.5 months in June 2021, according to the National Association of Realtors. A three-month supply means it would take three months for all the homes to sell at the current sales pace.
Higher mortgage rates and steep home prices
Mortgage rates began rising in January, with the 30-year fixed rate averaging 5.5% in July, roughly 2.5 percentage points higher than at the beginning of the year, according to rates provided to NerdWallet by Zillow.
Rates are expected to stay at about that level in the second half of the year, according to an average of forecasts by Fannie Mae, Freddie Mac, the Mortgage Bankers Association and the National Association of Realtors.
Meanwhile, year-over-year home prices soared in the first half of the year. The national median price for existing homes sold in the second quarter was $406,600, up 14% year over year, and hit a record high of $416,000 in June, according to the NAR. Existing homes are those that were owned and occupied before going on the market.
The NAR projects the median existing home price to drop quarter-over-quarter in the second half of the year, to $402,400 in the third quarter and $380,900 in the fourth quarter. A price drop from the peak spring and summer homebuying season is normal in the fall.
Prices will still be higher year-over-year, but those price gains will slow to 11.7% in the third quarter and 6.5% in the fourth quarter, according to the NAR's August economic outlook.
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