New data showed that September home sales fell to their lowest level on record as mortgage rates hit a 20-year high and inflation eaten away at existing savings.
New data from Redfin, which boasts it runs the country’s leading real estate brokerage website, released on Wednesday showed the extent of the slowdown – which had been widely predicted.
The number of homes sold in September fell 22.8 percent year-on-year, with 499,941 deals completed, compared to 647,413 in September last year.
The nationwide average for 30-year fixed-rate mortgage rates was 6.1 percent — up from 2.9 percent at this time last year — and has only risen since.
Redfin announced on Wednesday that September home sales were at an all-time low
Mortgage rates have more than doubled since last year and hit a 20-year high last week, according to data released Wednesday by the Mortgage Bankers Association.
The 30-year fixed rate rose to 6.94 percent in the second week of October, up from 6.81 percent the week before.
Redfin also reported that sellers were rethinking amid the market’s seizure: New listings fell 22 percent last month, setting another dismal record for the biggest drop in history excluding the pandemic months of April and May 2020.
“The US housing market is at another standstill, but the driving forces are vastly different from those that triggered the standstill at the beginning of the pandemic,” said Chen Zhao, head of economic research at Redfin.
“This time demand is collapsing due to rising mortgage rates, but prices are being supported by inflation and a drop in the number of people listing their homes.
“Many Americans are staying put because they’ve already moved during the pandemic and gotten a rock-bottom mortgage rate, leaving them with little incentive to move today.”
The median home price in the US rose 8 percent year-on-year in September to $403,797.
Mortgage buyer Freddie Mac reported Oct. 13 that the key 30-year average interest rate rose to 6.92 percent from 6.66 percent last week
Meanwhile, more than 60,000 sales contracts were canceled last month, accounting for 17 percent of the houses that were contracted.
The largest declines in home prices were in New Orleans, where they fell 5.7 percent.
Two California cities — Oakland and San Francisco — ranked second and third, with declines of 2.1 percent and 1.9 percent, respectively.
Boise, Idaho experienced the largest price declines in the entire metro area, with more than two-thirds (67.8 percent) of homes for sale cutting their prices in September.
El Paso, Texas saw the highest price growth, up 23 percent year over year to $245,950.
Next came West Palm Beach, Florida, where prices rose 22.2 percent; Greenville, SC (19.3%); and Miami (17.6%).
Zhao said he expects market conditions to deteriorate before they improve.
“With inflation still rampant, the Federal Reserve is likely to continue raising interest rates,” Zhao said.
“That means high mortgage rates — the main killer of housing demand — may not come down until early to mid-2023.”
The average American family making $71,000 can now afford only a one-bedroom, one-bathroom apartment in Manhattan at the new rates, but could have afforded a three-bedroom apartment at the old mortgage rates.
The average American family making $71,000 can now only afford a one-bedroom, one-bathroom apartment in Manhattan at the new rates, but could have afforded a three-bedroom apartment at the old mortgage rates, according to Zillow listings demonstrate
In Los Angeles, the average American family could afford a two-bedroom, two-bathroom mobile home under the current price, but could have gotten a 1,549-square-foot two-bedroom, two-bathroom condo with a pool in January
In San Francisco, the average American family can afford a 73-square-foot, one-bedroom, one-bathroom condo, but could have afforded a more modern, larger apartment at the old prices
In Los Angeles, on the other hand, the average American family could afford a two-bedroom, two-bathroom mobile home under the current price, but could have gotten a 1,549-square-foot two-bedroom, two-bathroom condo with a pool in January.
And in San Francisco, the average American family can afford a 73-square-foot, one-bedroom, one-bathroom condo, but could have afforded a more modern, larger apartment at the old prices.
Homebuyers are now moving out of these expensive cities, said George Raitu, senior economist at Realtor.com, noting that sales in the Midwest and Northeast are up.
In Chicago, for example, the average family could afford a 1,000-square-foot, two-bedroom, two-bathroom condo, while in Portland, Maine, they could afford a four-bedroom home.