The housing market is facing some serious challenges as mortgage rates remain high, home prices soar and inventory shrinks. Here are some of the key trends and events to watch for this week:
- Mortgage rates. The national average 30-year fixed mortgage rate crossed the 7% mark in the third week of August, rising to 7.09% the week ending August 171. This is the highest level since October 2022, when rates briefly spiked to 7.16%. The Federal Reserve has raised its benchmark interest rate twice this year, and is expected to hike it again before the end of 2023, putting more upward pressure on mortgage rates. Higher rates make borrowing more expensive and reduce the affordability and demand for homes.
- Home prices. The median existing-home sales price broke through $400,000 for the first time in 2023, hitting $410,200 in July1. This is the second-highest price ever recorded, and is only slightly below the all-time high of $413,800 reached in June 20221. Home prices have been driven up by strong demand from buyers, especially millennials and investors, and limited supply of homes for sale. According to the National Association of Realtors (NAR), there were only 1.32 million homes available for sale at the end of July, down 12% from a year ago1. This represents a 2.6-month supply at the current sales pace, well below the 6-month level that is considered a balanced market.
- Home sales. Existing-home sales fell for the second consecutive month in July, dropping 3.3% to a seasonally adjusted annual rate of 4.07 million1. This is the lowest level since January 2021, and 16.1% below the pace of July 20201. The decline in sales reflects the impact of high mortgage rates, low inventory and reduced affordability on buyers. New-home sales also slumped in July, falling 6.8% to an annual rate of 676,0002. This is the lowest level since April 2020, and 27.2% below the pace of July 20202. The supply of new homes for sale increased slightly to a 6.2-month supply at the current sales pace, but remained below the historical average of around 8 months2.
- Housing market outlook. Many experts believe that the housing market will continue to face headwinds in the coming months as mortgage rates rise further, inflation remains high and economic growth slows down. Some analysts have warned of a potential housing market crash as home sales fall and prices rise to unsustainable levels3. Others have predicted a more gradual cooling of the market as supply and demand adjust to changing conditions1. The housing market outlook may also depend on other factors such as the resumption of student loan payments, which could affect the cash flow and creditworthiness of many potential buyers3, and the impact of the delta variant of Covid-19 on consumer confidence and mobility.
As always, I will keep you updated on the latest developments and trends in the housing market. Stay tuned for more insights and analysis from myself as the Real Estate Market updates!