U.S. Existing Home Sales Plummet to Lowest Level in Over 13 Years
In a disappointing turn of events for the housing market, U.S. existing home sales dropped 4.1% in October, reaching the lowest level in over 13 years. This decline in sales has been attributed to a combination of high mortgage rates and a lack of available houses.
To make matters worse, the median house price in October was the highest for any October on record. With home resales in 2022 on track for their worst performance since 1992, it’s evident that the housing market is facing significant challenges.
The main culprits behind this slump are high prices, high mortgage rates, and homeowners unwilling to move, all of which have effectively frozen the housing market. Sales fell in the Northeast, West, and South, while the Midwest saw no change.
Comparing to October of the previous year, home resales plunged 14.6%. This can be attributed to the fact that the rate for a 30-year fixed-rate mortgage reached its highest level since November 2000. The Federal Reserve’s aggressive monetary policy tightening has had a direct impact on the housing market.
Adding to the woes, there is a tight supply of homes, with fewer than 1.2 million on the market, down 5.7% from last year. Builders are facing constraints due to higher borrowing costs, limiting their ability to embark on new housing projects. This lack of supply is driving up demand for new homes and keeping house prices on an upward trend.
In October, the median existing house price rose 3.4% from a year earlier. Additionally, properties typically remained on the market for 23 days, up from 21 days the previous year. First-time buyers accounted for only 28% of sales, falling well below the 40% necessary for a robust housing market. All-cash sales made up 29% of transactions, while distressed sales accounted for a mere 2%.
Looking ahead, the outlook for improved sales in the near term remains low. The housing market is expected to continue facing supply constraints and high mortgage rates in the coming months. It’s clear that until these issues are addressed, the housing market will struggle to regain its momentum.
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