Why the US housing recovery is ‘still miles away’ after November sales plunge

The struggling US housing market is “still miles away” from recovery, a leading firm warned on Wednesday after data showed a decline in existing home sales in November.

Sales of previously owned homes fell 35.4% to 4.09 million in November compared with the same month a year ago. monthly release From the National Association of Realtors. Sales fell 7.7% from October to November.

Existing home sales have fallen for 10 consecutive months – the longest decline on record. The typical property remained on the market for 24 days last month, up from 18 days year-to-date.

The alarming decline in sales is mostly due to the effects of rising mortgage rates, resulting in much higher monthly payments for buyers. While the average 30-year rate fell to 6.31% over the past week, it is still more than double from January.

“Our estimate for monthly mortgage payments was up 53% year-over-year in November,” Kieran Clancy, senior US economist at Pantheon Macroeconomics, said in a note, however, supporting our view that a meaningful recovery in sales is still miles away. Is.” “Home prices, meanwhile, are only going to drop further from here.”

House for sale
Mortgage rates have more than doubled this year.
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House prices are still “very high by previous standards” and are likely to fall “15 to 20% more”. Next yearaccording to Clancy.

The housing market has been under tremendous pressure this year as the Federal Reserve Increase in interest rates to control inflation, High mortgage rates have scared off potential buyers and caused sellers to think twice about lowering their listing prices or trading in their existing low rates for a new property.

The median existing-home price fell for the fifth month in a row to $370,700 in November after peaking at $413,800 in June. Still, the price was up 3.5% compared to a year ago – a sign that the correction may just be starting.

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Home prices are expected to decline in the coming months.
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“In essence, the residential real estate market froze in November, similar to the sales activity seen during the COVID-19 economic lockdowns in 2020,” said Lawrence Yoon, chief economist at NAR.

Fed Chair Jerome Powell has repeatedly acknowledged that policymakers see significant weakness in the housing market due to the impact of interest rate hikes.

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Sales of existing homes have fallen for 10 months in a row.
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In a speech in late November, Powell referred to market conditions as a “bubble”.

“Coming out of the pandemic, rates were very low, people wanted to buy homes, they wanted move out of the cities and buy homes in the suburbs Due to COVID, Powell said, “So you really had a housing bubble, you had housing prices going to very unsustainable levels and overheating and things like that.”

“Now the housing market will go through the other side and hopefully get into a better position between supply and demand,” Powell said.

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