High interest rates have maintained our housing sales in a deep frozen state over most of last year. It can take a while for the market to experience many thawing.
The US Real Estate Association stated on Friday that Americans purchased more than 4 million people they had owned last year. It was the smallest since 1995, far below the typical annual pace of about 5 million before the Coronovirus pandemic.
Sales rose slightly at the end of the year, increasing 9.3 % from the previous year to December. This increase probably reflects the decline in the mortgage rate in summer and early autumn, which is about 6 % on a average of fixed interest rate mortgages for 30 years. This has become an affordable price for buyers.
However, the mortgage rate has been rebounded to about 7 %, and most forecasts do not expect a big deal in the next few months. Charlie Dogarty, Economist by Wells Fargo, states that it is unlikely to increase housing sales this year.
“You saw your sales are starting to rise a bit, but it's still dull,” he said. “I don't think it will show a really powerful or energetic recovery.”
Americans were looking for more space, and the interest rates on the rock bottom made it easier to borrow, so housing prices have soared during pandemic. Real estate agents talked about enthusiastic bidding wars because they competed in a house where buyers could use.
The madness suddenly stopped when the federal preparation system led to raising interest rates to the highest level in decades, as inflation increased rapidly. Fixed interest rate mortgage interest rates for 30 years jumped to nearly 8 %, two years later, less than 3 % in late 2021.
With the combination of high prices and high interest rates, houses that many people are trying to buy have become affordable. Many of them were their owners who bought a house when the price was low or refinanced their mortgages, and there were few incentives to sell. As a result, the stock was low and the price was higher.
There is a hint that the housing market may gradually return to normal as new jobs, new babies, marriage, divorce, etc. are forced to sell, and as buyers adapt to higher borrowing costs. The stock has been woven, and the survey shows plans to sell more owners.
However, the normalization process is likely to be slow unless the mortgage rates fall.
“I think it's okay to say that housing sales have found the floor,” he said. But he added, “Looking at the overall level, it's still very weak.”
