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Home Sales Dip to 13-Year Low Amid Rising Mortgage Rates

2023.12.20

 

Key Takeaways

  • Existing-home sales likely fell 0.8% in November, hitting a 13-year low.
  • High mortgage rates and low inventory levels continue to challenge the housing market.

Market Trends in Home Sales

The upcoming existing-home sales report for November, scheduled for release on Wednesday, is anticipated to reveal a continued decline in the housing market. Economists predict a 0.8% drop in sales of previously owned homes from October, which would represent a significant downturn to a 13-year low. This trend is a direct consequence of the increasing mortgage rates that have been prevalent throughout the fall.

Impact of Mortgage Rates

The data for November primarily reflects the housing purchase decisions made in September and October, a period marked by a steady rise in mortgage rates. These heightened rates have significantly impacted affordability, causing potential homebuyers to reconsider their purchasing plans. However, there’s a silver lining as recent weeks have seen a decline in mortgage rates, potentially setting the stage for a revival in home-buying activities in early 2024.

Housing Inventory and Prices

A major factor compounding the market’s challenges is the persistently low inventory of available homes. This shortage has kept home prices near their peak, creating a challenging environment for buyers. Moreover, many current homeowners are opting to stay in their existing homes, deterred by the prospect of purchasing a new home at higher interest rates, despite having benefitted from lower rates in the past.

Historical Context

The current state of the housing market, with the projected figures for 2023, suggests that this year’s existing-home sales could be the lowest since 2011. This downturn marks a significant shift from the previously robust housing market, highlighting the broader economic challenges and uncertainties.

 


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