The U.S. housing market has stalled as potential homebuyers struggle to cope with rising prices and interest rates.
Cooling housing markets nationwide have industry experts predicting that 2023 will close out with the fewest home sales in over a decade.
The National Association of Realtors (NAR) recently reported a 0.7% decrease in existing home sales in August. Although the Midwest saw a small improvement, sales dropped in the South and West and remained flat in the Northeast.
For instance, in Dallas, headwinds have made it so first-time homebuyers need an average annual salary of $72,885 to pay for a starter home, which is a more than 10% increase compared to the salary required the year prior, as reported by The Dallas Express.
As previously reported by The Dallas Express, Dallas has one of the worst housing shortages in the country, at least according to an analysis by the Bank of America Institute. One contributing factor has been the City’s difficult-to-navigate and delay-prone development process, which often results in long permit cycles and frustration in the building community.
Moreover, the inventory of unsold homes in the United States fell to 1.1 million or a 3.3-month supply at the present sales speed, far from the ideal balanced market supply of six months.
Many homeowners are opting to keep their lower mortgage rates rather than upgrade to a new home due to ballooning interest rates. The 30-year fixed-rate mortgage stood at an average of 7.57% as of October 12, according to Freddie Mac.
In May, interest rates hit their highest levels since the start of the subprime mortgage crisis in 2007. Moreover, most Federal Reserve officials expect another interest rate hike before the end of the year, as reported by The Dallas Express. Although inflation has been easing slowly, food and energy prices have remained stubbornly high.
Meanwhile, home prices across the country are soaring after dipping a bit in the first half of the year, with Redfin recording a 3% bump in home prices in the four weeks ending on September 17.
In August, the median sale price of existing homes in the United States was $407,100, a 3.9% increase from August 2022’s figure of $391,700.
Zillow Group Inc. expects a sustained rise in home prices, projecting that home values will climb 4.9% over the coming year.
Within this challenging environment, Fannie Mae forecasted home sales nationwide to reach around 4.8 million by the end of the year, the lowest number of sales recorded since 2011.
The financing company does not expect home sales to rebound much next year amid an anticipated minor economic downturn early on caused by monetary policy tightening. It projected a total of 4.9 million homes to be sold in 2024.