Home Sales Decline In US Maintains a 9-Month Streak
Dec 08, 2022
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October 2022 marks the ninth consecutive month in which the sale of previously occupied homes in the United States of America has fallen. This set a new record for the slowest sales pace in over ten years.Consumer loan experts at Credit-10 have noted that the extremely high-interest rates by the Federal Reserve can be faulted for these slow sales as the mortgage rates are now significantly higher across the country, with citizens having less spending power.
The National Association of Realtors also observed that this new decline record is the longest experienced since 1999. Yet, the prices attached to these few homes available have ironically continued to increase and become more unaffordable for citizens.
Sales Decline Statistics
According to information from the National Association of Realtors chief economist Lawrence Yin, the price of US homes, on average, has reduced significantly in the past few months. The median price, which was at its peak in June 2022, has decreased thankfully by 8%. However, the prices are still 40% higher than the pre-pandemic rates, which still leaves a wide gap.
Due to these highly increased rates, the mortgage rates on each property are significantly higher as interested home buyers now have to pay double or even three times the pre-pandemic rates. Data from Freddie mortgage agency revealed that the 30-year fixed mortgage rate, considered high at 3.1% a year ago, was over 7% in October, a rate that has yet to be recorded since 2002.
Impacts of the New Mortgage Rates on the Housing Market
The Federal Reserve has clarified its intentions to continue hiking the mortgage interest rates. Only two weeks ago, the rates were raised for the fourth time just this year by 0.75% again, pushing the rates to about 4%. Ultimately, this interest hike has been a pain to homebuyers as the monthly mortgage payments will be too much to bear, especially for low-income families.
This inflationary situation has also led to a slowdown in home construction and building, hence, the reason behind the shortages of properties in the US housing market. With fewer homes on the market available at significantly higher prices, the housing market has slowed down, and the impacts of inflation on this sector are not expected to be forgotten anytime soon.
The NAR chief economist also predicts that the hike in home prices will only reduce by 5% in half of the country in a year, which means that the rates will still be 35% higher than in the pre-pandemic era.
Which Homebuyers Are Most Affected by This Mortgage Hike?
Routinely, new home buyers contribute to about 40% of home sales in the United States. However, these hiked mortgage rates and home prices have caused a drastic reduction in that ratio, as they represented only 28% of the sales in October.
Notable Differences in Interest Rates
On a lighter note, home prices have declined for four consecutive months, and the authorized bodies worldwide are doing their best to ensure that inflation is controlled. Experts noted that the European nations have adopted several anti-crisis measures to ensure that the effects of this inflation of borrowers are reduced significantly.
Though the average interest rates are higher than pre-pandemic levels in the USA, they have continued to drop in the past few months. Hence, there is still hope for prospective homebuyers as consumer loans, even with large sums, are becoming more available.