US home sales and new listings plunged to new lows in September, with one prominent real estate firm warning the market is “going to get worse.” Home loan interest rates soar in the coming months.
The number of homes sold in September plunged 25% year-on-year to 478,593. This is the lowest number on record outside of the disruption of the COVID-19 pandemic. In data released Wednesday by RedfinThe number of new home listings dropped 22% from last year to 503,156.
The big drop is largely due to the continued rise in mortgage rates, which are expected to approach 7% this week and rise as the Fed implements further rate hikes. Rising mortgage rates put pressure on affordable mortgages and pushed many buyers out of the market.
“The housing market will get worse before it gets better,” Chen Zhao, Redfin’s chief economic researcher, said in a statement. “With inflation still rampant, the Federal Reserve will likely continue to raise rates. It means that you have a nature.”
The average 30-year fixed rate mortgage last week was 6.92%, according to Freddie Mac. The average rate has more than doubled since his January.
At current long-term interest rates, average monthly mortgage payments are more than 50% higher than at the same time last year. According to Redfin, the tightness of affordability is also impacting sellers looking to purchase a new home without having to acquire a new home at a higher mortgage rate.
Overall, the housing market is in “another slowdown” similar in magnitude to the recession that occurred early in the COVID-19 pandemic, but for very different reasons.
“This time around, demand has slumped due to soaring mortgage rates, but prices are underpinned by inflation and a decline in the number of people putting their homes up for sale,” said Zhao. “Many Americans have already moved during the pandemic and have recorded the lowest mortgage rates, so there is little incentive to move today because they are stuck in the status quo.”
house prices are falling Because sellers are trying to get cautious buyers to take action. The average selling price tracked by Redfin fell 0.5% to $403,797 in September, but prices are still up 8% year-on-year.
Fed officials, including Chairman Jerome Powell, have acknowledged signs of weakness in the housing market as they push forward with efforts to tighten policy.
More troubling data points emerged this week, homebuilder confidence plummeted by 10th As noted Pantheon Macroeconomics economist Ian Shepherdson said: The result is a “disaster”.
Housing starts fell 8.1% in September, with single-family home starts falling to their lowest level in two years.