The US housing market continues to face challenges as mortgage rates and a shortage of inventory put a squeeze on potential homebuyers. According to the National Association of Realtors (NAR), existing home sales declined by 4.1% in October, marking the slowest sales pace since August 2010. On an annual basis, existing home sales are down 14.6% compared to October 2022.
The persistent lack of housing inventory and the highest mortgage rates in a generation are contributing to the difficulties faced by prospective homebuyers. Lawrence Yun, NAR’s chief economist, stated that multiple offers are still happening, particularly for starter and mid-priced homes, even as price concessions are being made in the upper end of the market.
At the end of October, there were approximately 1.15 million homes for sale, representing a 5.7% decrease from the same time last year. The decline in inventory has led to an increase in prices, with the median price of existing homes sold in October rising by 3.4% to around $391,800 compared to the previous year.
Despite the challenges faced by buyers, home sellers are benefiting from the rising prices. Yun mentioned that typical homeowners have accumulated over $100,000 in housing wealth over the past three years. However, homes are selling at a faster pace, with an average of 23 days on the market in October, a significant increase from the pre-pandemic period when homes typically took about a month to sell.
The supply crunch in the housing market is primarily driven by the significant increase in mortgage rates over the past year. The Federal Reserve’s indication of keeping interest rates at peak levels for an extended period has further contributed to the limited housing options available to eager buyers. The current pace of sales would take approximately 3.6 months to exhaust the existing home inventory, whereas experts consider a pace of six to seven months as a healthy level.
The combination of high mortgage rates and expected slow job growth due to a mild economic downturn is predicted to keep the market for existing homes constrained through much, if not all, of the first half of 2024. Homebuyers will need to navigate these challenges as they seek to attain homeownership while facing limited inventory and rising mortgage rates.
Q: What is the current state of the US housing market?
A: The US housing market is facing difficulties as existing home sales have declined, mortgage rates are high, and there is a shortage of inventory.
Q: What is the impact of high mortgage rates on homebuyers?
A: High mortgage rates make it challenging for prospective homebuyers to enter the market and afford homes.
Q: How does the shortage of inventory affect housing prices?
A: The limited inventory leads to increased competition among buyers, driving up housing prices.
Q: How long does it take for homes to sell on average?
A: In October, homes sold on average in 23 days, a significant decrease from the pre-pandemic period when homes typically took about a month to sell.
Q: What factors are contributing to the supply crunch in the housing market?
A: The astronomical rise in mortgage rates and the Federal Reserve’s indication of maintaining high interest rates are major contributors to the limited housing options available.