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Rising mortgage rates continue to slow the housing market, with both home sales and listings declining sharply.
Newly released data from the National Association of Realtors shows that existing home sales fell for the eighth straight month in September to an adjusted annualized rate of 4.71 million, down 1.5% month-over-month. Sales are down about 24% compared to a year ago.
“The housing sector continues to suffer a correction as interest rates continue to rise, approaching 7%,” said Lawrence Yun, chief economist at the NAR. and we’re seeing a significant drop in sales.”
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Median existing home sales rose 8% year-over-year in September to $384,800, marking the third consecutive month of price declines after hitting a record high of $413,800 in June. .
The decline was indicative of a seasonal trend, with prices falling after peaking in the summer, but the 7% decline from June to September was followed by a 3.1% decline in 2021 during the same period. was more than double the rate of decline for
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Many Americans are sticking with the status quo because they don’t want to risk losing their low, fixed mortgage rates during the pandemic, said Chen Zhao, chief economic researcher at Redfin.
Inflation and a decline in the number of people putting their homes up for sale are supporting prices, despite a drop in demand caused by soaring mortgage rates.
What are the mortgage interest rates like?
The Federal Reserve’s attempt to curb inflation by raising interest rates has pushed mortgage rates to their highest levels in 20 years.
According to Freddie Mac’s Primary Mortgage Market Survey, the average interest rate for a 30-year fixed-rate mortgage rose to 6.94% in the week ending October 20. This time last year, the rate was 3.09% for him.
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Mortgage applications fell to their lowest level in 25 years, according to the Mortgage Bankers Association.
The current 30-year fixed rate is more than 3 percent higher than it was a year ago, and both purchase and refinancing requests are down 38 percent and 86 percent, respectively, from the previous year, said the MBA’s vice president and deputy chief. Joel Kan said. economist.
Housing Market and Mortgage Rates
Homebuyers lost 29% of their purchasing power as average 30-year fixed mortgage rates rose from 2.65% in early 2021 to over 6.6%, according to Redfin.
Nationwide, about 60,000 home purchase contracts were canceled in September. This represents 17% of the homes that were contracted, the highest percentage ever outside of March 2020.
Homebuilder confidence fell for the 10th straight month in October, according to the National Association of Home Builders, hitting its lowest level since May 2020 after the pandemic hit the economy.
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“Rising interest rates, rising inflation and deteriorating house prices will likely keep the housing market down in 2023,” said Abby Omodanbi, senior economist at PNC Financial Services Group.
The Census Bureau’s new homebuilding data for August showed 290,000 unstarted homes approved for construction, just below the all-time high of 298,000 in July.
housing inventory
Housing inventory at the end of September was 1.25 million units, down 2.3% from August and down 0.8% from the previous year. Unsold inventory remains at his 3.2 month supply at current sales pace. No change from August, up from his 2.4 months in September 2021.
“Despite the slowdown in sales, multiple offers are still happening and with limited inventory, more than a quarter of homes are selling above list price,” Yun said. says.
Is a housing market crash coming?
The future housing adjustment will not be as severe as the global financial crisis of 2007-09, experts say.
A few years before the 2008 housing market crash, mortgage lenders were offering borrowers subprime loans without a verified income or proper down payment while promoting riskier loan products. Despite last year’s lowest interest rates, strict loan underwriting standards are the norm.
This time around, household balance sheets appeared to have improved, and excess borrowing did not spur a boom in the housing market. Prices rose due to lower inventory levels and lower mortgage rates, in addition to high demand during the pandemic.
latest housing market news
►First-time buyers accounted for 29% of sales in September, up slightly from 28% in September 2021, according to NAR.
► All-cash sales accounted for 22% of transactions in September, up from 24% in August 2021 and 23% in September.
►Retail investors or existing homebuyers, who make up the majority of cash sales, purchased 15% of homes in September. Down from 16% in August, but up from 13% in September 2021.
► Weak sales such as foreclosures and short sales accounted for 2% of sales in September, up slightly from 1% in August 2022 and September 2021.
Swapna Venugopal Ramaswamy is USA TODAY’s housing and economics correspondent. Follow her on her Twitter @SwapnaVenugopal and sign up for her Daily Her Money newsletter here.
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