The slowdown in the housing market continued significantly into September, according to the latest data from real estate brokerage Redfin. Home sales and listings fell during the month, signaling that buyers and sellers are thinking twice before making a move.
The drop was the biggest on record — aside from the March 2020 drop, that is.
The number of homes sold fell 25% year over year and new listings fell 22%. Persistently high prices coupled with high interest rates create a toxic mix of unaffordability – and even worse, uncertainty about what’s to come.
Things are always expensive and getting more and more expensive
The average 30-year fixed mortgage rate is almost 7% now, more than double what it was at the start of the year and the highest in 20 years. Despite this, prices have not come down much.
Nearly a quarter of homes that were for sale in September saw their prices drop, but the median price was still 8% higher than it was in September 2021.
These high interest rates and high prices mean that aspiring homeowners and those who already own a home are reluctant to commit.
You can see why buyers are discouraged: if you bought an average home now, the monthly mortgage payment would be 55% higher than if you had bought it in early 2022, according to Zillow.
Read more: ‘The numbers just don’t work’: As rising mortgage rates cause some buyers to give up, others think they’ve found a workaround
Zillow says that would leave the nation’s median household spending 30% of their income just on principal and interest payments when buying a home, making them “overburdened.” And that 30% excludes everything that comes with home ownership: taxes, insurance and maintenance.
High costs lead to lost business
Around 60,000 transactions were canceled in September, or 17% of all homes under contract. It’s not just the buyers who are pulling out, but the sellers as well.
According to another Redfin report in September, 85% of homeowners have a locked-in mortgage rate well below the current rate and fear that if they sell, their next rate will be several percentage points higher. This helps people stay put, which translates to fewer homes on the market, which then keeps prices high — almost like a real estate dead end.
And it’s a problem that could persist in the long term, as less new construction may also come to market. Homebuilder confidence hit a 10-year low in October, according to the National Association of Homebuilders (that is, excluding spring 2020). He’s dropped eight points this month to 38.
And while some say the market is becoming more balanced, Robert Dietz, chief economist for the National Home Builders Association, doesn’t think so.
“The truth is that the homeownership rate will decline over the next few quarters as higher interest rates and still high construction costs continue to drive down the price for a large number of potential buyers. “, Dietz said in a press release.
What to read next
Should I wait for the housing market to crash before buying a house? 3 Reasons This Real Estate Slowdown Has Nothing To Do With 2008
‘It was a tough and scary time’: Baby boomer financial experts who lived through the Great Inflation tell how to ride out a recession
Here’s how much the average 60-year-old American has in retirement savings – how does your nest egg compare?
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.