home resales suffer from soaring interest rates

Washington (awp/afp) – U.S. home resales fell in September for the eighth straight month as mortgage interest rates now hit 20-year highs, but demand remains high, and the number of properties for sale too low.

Last month, 4.71 million homes and apartments changed hands at an annualized rate, the National Federation of American Realtors (NAR) announced Thursday.

That is 1.5% less than in August, and 23.8% less than in September 2021.

This is “the lowest level since May 2020”, underlines Rubeela Farooqi, chief economist for HFE.

As for prices, which had reached a historic record in June, they also continued to decline, for the third month in a row, and have already plunged by 7% compared to June. The median price of a house was thus $384,800 in September, which remains 8.4% higher than September 2021.

“Despite weaker sales, (…) more than a quarter of homes are selling above starting price due to limited inventory,” said NAR chief economist Lawrence Yun. in the press release.

“The current lack of supply underscores the vast contrast to the previous major market downturn from 2008 to 2010, when inventory levels were four times higher than they are today,” he added. .

Thus, 70% of the houses sold in September remained on the market for less than a month.

Purchases on the real estate market have taken off with the pandemic thanks to real estate rates reaching historic lows and the need for space for families now regularly working from home.

But the insufficient number of properties on the market to meet this very strong demand has caused prices to soar, slowing down the progression of sales, and preventing many households from acquiring a property.

Further reductions to be expected

And since the start of the year, interest rates on mortgages have soared due to the fight against inflation, and are now at their highest for 20 years, at 6.9% for one loan in 30. years – the most common in the United States – according to data published by the real estate refinancing group Freddie Mac.

Real estate sales should thus continue “to fall until the beginning of next year”, anticipates Ian Shepherdson, economist for Pantheon Macroeconomics, in a note.

Sales, then, “will have fallen to the incompressible minimum level, where the only people who move are those who have no choice because of professional or family circumstances”, he explains.

Inventories of houses and apartments for sale “are slowly increasing but remain very low, (…) in part because soaring rates are delaying selling decisions as well as buying decisions. If you are planning to move and you need a new home loan, you will have to face a huge increase in rates”, further details the economist.

However, new apartments and houses for which the first stone was laid last month are also down, -8.1% compared to August and -7.7% compared to September 2021, according to data published on Wednesday. by the Department of Commerce.

For individual houses alone, the fall is even 18.5% compared to the same period last year.

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