Source: Forbes —
Key Takeaways
- Housing sales have fallen for the ninth consecutive month, with transactions down 28.4% compared to this time last year.
- Average prices have also come down, hitting $379,100 compared to $413,800 in June.
- It comes as mortgage rates continue to rise rapidly, hovering around 7% from below 3% at the end of 2021.
- For first time buyers it means potentially taking a longer term view on their home buying plans, with investment an option to consider for increasing their down payment.
Housing sales continue to tumble as October marks the ninth month in a row we’ve seen falling numbers. It saw a 5.9% drop in sales from the previous month, with annual figures down 28.4%.
It’s the longest downward trend since 1999 and it’s causing analysts to question what it might mean for the housing market.
Because just like a lot of the economic data that we’re seeing right now, it’s not all bad. Despite the number of house sales showing a very clear downward trend, average values have so far been holding up reasonably well.
The median home price in the US hit $379,100 in October, representing an increase of 6.6% over the 12 months before. It’s not all gravy though, with that figure having come down from its June high of $413,800.
So what are we seeing here? With home sales numbers continuing to go down and the median price coming off its top, is this the beginning of a housing market downturn? Or is real estate simply taking a breather before it charges back up again?
Why is the housing market cooling?
It’s clear that the heat is starting to come out of the housing market. This is coming off the back of a couple of years of incredibly strong growth, despite the upheaval caused by the Covid-19 pandemic.
Now the tide appears to be turning, but why?
Well, we can blame the Fed. Blame is probably a bit harsh, but the reality is that the housing market is being directly impacted by the rise in interest rates. Right now the Fed is fighting inflation hard, which has led to four consecutive rate hikes of 0.75 percentage points.
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