U.S. dwelling prices reached an all-time high despite a transaction cliff. Amid interest rate burdens and supply shortages, transactions have occurred mainly among high-income groups, leading to rising price indicators in a phenomenon described as the "transaction cliff paradox," which has unfolded similarly to the situation in Korea.
According to a report by National Public Radio (NPR) citing the National Association of Realtors (NAR) survey on the 26th (local time), the median sale price of existing dwellings last month was $435,300 (approximately 600 million won), breaking the all-time high. In contrast, the volume of dwelling transactions decreased by 2.7% from the previous month, hitting a 9-month low.
Jessica Lautz, deputy chief economist at NAR, noted, "The current market is split between the haves and have-nots," stating, "Cash buyers are leading the transactions, while the middle class and first-time homebuyers are pushed out by prices and interest rates."
In fact, 29% of total transactions last month were cash purchases, with transactions for high-priced dwellings over $1 million increasing by 14% compared to the previous year. In contrast, first-time homebuyers accounted for only 30% of total transactions. The median dwelling price increased by 48% over the past five years, making it harder for genuine buyers to enter the market.
The current average mortgage interest rate of 6.74% is further dampening purchase sentiment. Lautz explained, "High rates are not only a factor that suppresses demand but also induce a lock-in effect that prevents current homeowners from listing their properties." This is leading to a deepening shortage of listings as homeowners who secured loans at lower rates during the pandemic hesitate to switch.
Ironically, if rates drop, a surge in pent-up demand could further increase pressure on prices. Lautz warned, "If the demand segment that has been marginalized in the current market floods in, new entrants could face tougher competition."
There were also regional temperature differences. According to a survey by the real estate information platform Redfin, dwelling prices fell in 30 of the 50 major cities in the United States, with significant declines seen in Washington, D.C., San Diego, and Austin. This was interpreted as a result of rising interest rates and regional economic slowdown.
The new dwelling market recorded lower prices compared to existing dwellings. Last month, the median sale price of new single-family homes was $401,800, about $40,000 cheaper than existing homes. This was attributed to home builders expanding supply focused on smaller homes and offering price reduction incentives.
However, due to the impact of high interest rates, both new dwelling starts and permits showed a decline. Last month, the number of single-family dwelling starts hit its lowest level in 11 months, and the number of new building permits fell to its lowest level in two years. Concerns were raised that continued supply contraction could act as a factor that raises dwelling prices again in the medium to long term.