A new report found that home sales saw their biggest ever decline in September as mortgage rates soared, driving prospects out of the once-hot housing market.
a reportrt from real estate company Redfin Excluding the numbers when the coronavirus pandemic began in April and May 2020, it shows a 25% drop in the number of homes sold and a 22% drop in new listings.
“The U.S. housing market is sluggish again, but the dynamics are quite different from those that caused the slump at the start of the pandemic,” said Chen Zhao, Redfin’s chief economic researcher, in a statement.
“This time around, demand has been subdued by soaring mortgage rates, but inflation and a decline in the number of people putting their homes up for sale have supported prices,” Zhao added. “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.”
Although house prices have fallen recently, monthly payments have increased by more than 50% year-on-year due to extremely high mortgage rates, the report said.
Median US home prices rose 8% year-over-year in September to $403,797.
Meanwhile, more than 60,000 purchase contracts were canceled last month. This represents his 17% of contracted housing.
Still, Zhao expects market conditions to deteriorate before they improve as the Federal Reserve battles rising inflation.
“The Fed will likely continue to raise interest rates because inflation is still rampant,” Zhao said. “This means that high mortgage rates, a major killer of housing demand, may not come down until early to mid-2023.”
Mortgage rates have more than doubled since last year and hit a 20-year high last week. according to the data The Mortgage Bankers Association announced Wednesday.
The 30-year fixed rate rose to 6.94% in the second week of October, up from 6.81% the previous week.