Housing market: Why did home sales hit a 13-year low?
In the United States, home sales hit a 13-year low in September. What factors drove down demand?
High-interest rates and a short supply of houses have led to a historic home sales decline across the United States. The average interest rate for a 15-and-30-year mortgage is 7.63 and 6.92 percent, respectively, which makes the actual value of purchasing a home much more expensive compared to a low-rate environment.
In the week ended Oct. 19, average interest rates for fixed-rate mortgages rose to 7.63% for the 30-year and 6.92% for the 15-year https://t.co/IsFhIvR2DM pic.twitter.com/8ACo4CXWkY
— St. Louis Fed (@stlouisfed) October 20, 2023
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From August to September 2023, existing home sales fell two percent to 3.96 million, down 15.4 percent from last year, according to the National Association of Realtors. This is the lowest number of homes sold in over thirteen years. The median price of homes sold grew to 2.8 percent, to $394,300, which, according to the National Association of Realtors, made September “the third consecutive month of year-over-year price increases.”
What has driven up housing prices?
Higher prices mean that fewer potential sellers are likely to put their house on the market because even if they are able to use any increases in the market value of their home since they purchased it, short supply means they may not be able to upgrade to a better property. Additionally, unless they are able to purchase the house out front, they may have to secure a mortgage with a higher interest rate than the one associated with their current property. However, if fewer houses are put up for sale, and demand remains constant, prices will continue to rise.