A recent report from the National Association of Realtors (NAR) said that pending US home sales plunged for the third month in a row. At the end of August, three of the four major regions saw month-on-month declines. real estate Only the West is making a small profit. Year-over-year, all four regions showed her double-digit declines.
“Mortgage interest rates have been the driving force behind home purchases, and the highest interest rates in a decade have seriously hurt contract signings,” NAR chief economist Lawrence Yun said in a statement. As mortgage rates fall and the economy continues to add jobs, homebuying should stabilize.”
The NAR expects existing home sales to fall 15.2% to 5.19 million units in 2022, while new home sales are forecast to fall 20.9%. Yoon expects price increases to slow in 2023 and sales to increase as the year progresses. “Next year, median annual house prices are expected to rise by only 1.2%,” Yoon added. “house sales There will be a recovery in the second half of 2023, but overall there will be a 7.1% decline.”
Dottie Herman, vice chairman of Douglas Elliman, one of America’s largest real estate firms, still hesitates to call the current situation a recession.
“Obviously everyone is experiencing a market chill compared to 2021, but that’s a bad comparison,” she told the Epoch Times. So after last year everything is going to be terrible.We have to look at the pre-pandemic numbers.”
Herman explained that August is traditionally a ‘dead month’ for real estate due to the summer holidays. Usually the fall market starts rising around the end of September he early October.
With interest rates currently teetering in the mid-6% range, many experts like Herman believe the seller’s market will continue for the foreseeable future. She remains wary of using the word “recession.”
“The difference between today and 2008 is that we still have very little inventory today,” she added. “People who bought a home in the last few years are not likely to move now and pay higher interest rates.”
Harman acknowledged that rising interest rates have slowed home sales, but noted that they are still well below the national historical average of 7.5%. “Rating back to the start of the pandemic, interest rates were as low as 2.5% for her, which is something I have never seen before,” she said. She “remembers that on the first house she paid 15% interest and on top of that she took out an ARM (Adjustable Rate Mortgage).”
Ernest Jones, president of the National Association of Mortgage Bankers and mortgage broker at Minneapolis-based Lend Smart Mortgage, believes ARM could be attractive to some buyers. increase. “ARM always has some unknowns, and most people who choose ARM prefer to get out of them in a period of time,” he told the Epoch Times. “It may be difficult right now because we don’t know what the market will be.”
Interest rates are currently around 6.5%, but could be higher depending on the potential homebuyer’s credit score and debt-to-income ratio, Jones explained. In most cases, lenders will ask for a credit score of at least 700 and a large down payment, usually around 20%.
“I think there are many factors that influence the thought process of today’s consumers when considering buying a home,” says Jones. “This is probably the biggest decision of your life and many may delay making that jump now until they have a better understanding of what is happening in the market.”
Northeast home sales are down 19%, while Midwest sales are down 21% from August 2021, according to the NAR. decreased by 31% year-on-year.
“Housing prices are among the most affordable in the West, and as a result, the region has seen a more severe annual decline in contract signings compared to the rest of the country due to rising interest rates,” Yoon said. added.
Many economists are predicting a recession in 2023, but Harman admits he can’t make an entirely accurate forecast at this point. “I don’t think prices will drop much, and I think builders are holding back now,” she said. “I think there is more room for negotiation, especially as we enter the winter months when things traditionally slow down.”
In the meantime, she noted, the rental market is “off the wall” in many parts of the country, especially as potential first-time homebuyers are either being discounted from the market or have too little inventory to choose from. .
Yun predicts that the economy will remain sluggish through the end of 2022 and interest rates could reach 7% in the coming months. “Only when inflation settles will mortgage rates start to stabilize,” he said.