U.S. home sales data was released. home sales fell 1.5% in September from a year earlier to an annualized 4.71 million units, the lowest since May 2020 and in line with market expectations.
It was also the longest sustained decline since 2008, with eight consecutive months of declines and a drop of nearly 24% compared to last year.
However, the real estate market has not come to an end, and based on the number of loan applications available, this number will fall further.
Looking at the breakdown, sales of lower priced homes have declined the most, with sales of $100,000 to $250,000 homes down 28.4% year-over-year, $250,000 to $500,000 homes down 17.9%, and $500,000 to $1 million homes the strongest, down less than 10% year-over-year.
Clearly, the current inflation and economic problems are affecting lower income groups more.
With interest rates now so high, are some people unable to withstand the pressure and forced to sell their homes?
Yes, but the rate of increase is relatively small, only 1%.
In addition, among the homebuyer group, first-time buyers continue to dominate this figure, accounting for 1% more than last year, while investment buyers are down 2%.
This indicates that the current sales decline is mainly due to the reluctance of those who own homes to sell at lower prices, and the reduced willingness of those who want to buy homes to invest.
However, the new home buyers remain firm, which is a reflection of the fact that the U.S. economy and employment environment remain firm.
If you look at home prices, the median price stayed at $385,000, which is down but still nearly 9% higher than the $354,000 at the beginning of the year.
This has a lot to do with the housing shortage, and this drop in sales figures is very different from back in 2008, when there was four times the inventory of homes than there is now.
There has been an oversupply of homes in the U.S., and home prices have been rising over the years and have not been resolved until now.
Now the U.S. must build homes on a large scale to address the shortage. However, as the Fed's interest rates have risen, developers' willingness to build homes has become sluggish.
After all, for them, the cost of financing has become higher, but the willingness to buy homes has become even lower. Right now, building a house would be a big risk.
When the financing costs become lower, the market demand has risen, and then digging the foundation is definitely too late. By then, people who want to buy homes will have to turn to existing inventory, which is already in short supply, and prices will naturally have a long-term incentive to rise.
