The market slowdown is anticipated to persist as mortgage rates approach 7%, up from approximately 3% a year ago.
As mortgage rates rose, making house purchases more expensive, existing home sales in the United States decreased for the eighth consecutive month in September.
The National Association of Realtors said Thursday that sales of previously owned houses fell 1.5% from the previous month to a seasonally adjusted annual rate of 4.71 million, the lowest pace since May 2020. Sales decreased 23.8% from September of last year.
Because of the Federal Reserve’s activities to raise loan rates and drive many potential purchasers out of the market, existing-home sales have fallen 27% from their previous peak in January.
According to real estate agents, some purchasers are no longer eligible for mortgages at the present rates, while others have pulled out of the market because of broader economic concerns. Some prospective sellers choose to stay put rather than sell their houses and acquire new ones with more significant borrowing expenses because many present homeowners have mortgage rates below 4%.
According to housing-finance organization Freddie Mac, the average rate on a 30-year fixed-rate mortgage was 6.94% this week, up from 3.09% a year ago.
Although the rate of home price rise has slowed from early in the year, prices are still higher than they were then.
According to NAR, the median price of an existing house increased 8.4% from a year ago to $384,800 in September. After reaching a record high of $413,800 in June, prices dropped for the third consecutive month.
When measuring inflation, housing is one area that receives the greatest weight, but it’s also one of the hardest to assess. David Harrison of the WSJ explains how the shelter index is determined and why it may cloud the Fed’s view of inflation. Example: Laura Kammermann
Because the September sales data do not account for the most recent hikes in mortgage rates, Lawrence Yun, chief economist for NAR, said, “we are not yet at the bottom.”
The Wall Street Journal’s survey of economists predicted that sales of previously owned houses, which make up the majority of the housing market, would decrease by 2.1% every month in September.
The September numbers primarily represent purchases made in August and July, when borrowing rates were slightly lower than they are now. Since homes often go under contract a month or two before the deal closes, these months are reflected in the data.
Due to rising interest rates and the customary seasonal slowdown in house buying in the autumn and winter, demand is projected to continue to decline in the upcoming months. According to the Mortgage Bankers Association, mortgage applications for house purchases decreased 38% from a year earlier in the week ending October 14.
According to Joel Kan, deputy head economist for the MBA, the 30-year fixed has often fluctuated between 3% and 4%. Nearing 7% interest rates “is both a significant concrete shock and perhaps a mental or psychological barrier.”
Because they intended to downsize, Roman and Sondra Solene advertised their Phoenix home in August. However, after seven weeks, they had not received any proposals, and when interest rates rose, they were hesitant to abandon their present 2.85% rate, according to Mr. Solene.
Even if we reduce, my mortgage will still be relatively close to what we’re paying now, I reasoned, he added. “I was like, ‘It’s simply not worth it,’ as [the average rate] began moving into 6.3%, 6.4% range.”
They opted to stay put and pulled the property off the market.
According to real estate firm Redfin Corp., in the four weeks that concluded on October 9, 7.9% of properties on the market each week had a price decrease, up from 4% a year earlier.
According to the NAR, the typical property sold in September was on the market for 19 days, an increase over the previous month’s 16 days.
According to NAR, there were 1.25 million houses for sale or under contract nationwide at the end of September, a decrease of 0.8% from September 2021 and 2.3% from August. At the end of September, a 3.2-month supply of houses was available on the market based on the current sales rate.
Some cities where the recent housing bubble saw the biggest price increases had experienced a quick cooling off. According to the Boise Regional Realtors, the median house selling price in Idaho’s Ada County, which contains Boise, increased by 0.9% in September compared to the same month last year. This was a decrease from the 44% price rise from May 2021.
Jackson Waste, 26, was anxious about the house-seeking process since he had heard from coworkers how difficult it was in Boise. However, there wasn’t much competition when he and his fiance Lilly Kritler started shopping in August. In September, the couple paid $395,000 for a three-bedroom home, approximately $10,000 less than the asking price.
Mr. Waste stated, “I was gearing myself for disappointment after disappointment. But he said that in the market, “it’s like a light switch was flicked.”
In September, the market’s percentage of first-time buyers increased from 28% to 29%. According to NAR, only 22% of existing-home sales in September were made with cash, compared to 23% in the same month last year.
The South and the Midwest saw the largest monthly declines in existing-home sales, 1.9%, and 1.7%, respectively.
The National Association of Home Builders said this week that a gauge of homebuilder confidence in the United States declined for the tenth consecutive month in October to the lowest since May 2020.
According to data released this week by the Commerce Department, housing starts—a gauge of the nation’s house construction—fell 8.1% in September compared to August. Residential building permits, a leading indicator of future home building, increased by 1.4%.
- Realtor.com is run by News Corp, the company that owns the Journal, by a NAR license.