US existing home sales drop to the lowest level since 1995
In December, the housing market experienced its worst year for almost 30 years as American homes sold fell.
According to figures from the National Association of Realtors released Friday (19 Jan) closings on contracts decreased by 1 percent when compared to the month before and amounted to 3,78 million per year. Sales for 2023 will be at their lowest level since 1995.
The housing market – which is one of the most prone areas of the economy to interest rates – was in a state of turmoil because the Federal Reserve increased borrowing costs to the highest levels seen since the beginning of 2000.
Since then, the focus of policymakers has been shifting to lower rates. Mortgage rates are now lower than they were in October when they hit a peak of around 8 percent. Many homeowners are hesitant to relocate their homes in the event that rates decrease.
The sales in the last month are at a low point prior to a rise in the next year. Rates on mortgages are down a lot from two months ago. In the coming months, there will be more inventory available.
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The data this week showed that mortgage applications for homes rose to their highest level since the beginning of July. The mood of builders has improved which will boost the supply of new construction.
The number of properties that were previously owned, and for the month of March, sales fell to 1 million. This is the lowest since March. To sell all properties on the market at this rate it will take 3.2 months. A supply of less than five months is considered as insufficient by realtors.
The lack of inventory helps to keep prices high. In December the median price for selling rose to US$382,600. Each of the four regions experienced an increase in prices. The prices reached a new record of US$398,800 by 2023.
Around 45% of homes were sold in less than one month in the market. The homes were listed for 29 days compared to 25 days during November.
According to new projections citing the high price of homes relative to income, it could take a few some time for the resale market to fully recover from its pre-pandemic state.
Most homes are sold by homeowners who have already lived in the home, and the majority are sold in accordance with contracts closing. The data on sales of new homes which are based on contract signings are expected to be released in the coming week.
