2023 Home Sales Expected to be Lowest Level Since Housing Crisis
New York, NY, October 23, 2023-"The highest mortgage rates in 23 years are dragging down home sales to their lowest levels since the subprime crisis period,” reports the Wall Street Journal.
“Sales of previously owned homes in 2023 are expected to dwindle to a rate not seen since at least 2011, when the U.S. population was smaller and the country was still recovering from one of the worst housing crises ever, according to many economist forecasts.
“Chen Zhao, economics research lead at real-estate brokerage Redfin, estimated that total existing-home sales in 2023 would amount to around 4.1 million, which would mark the smallest number of sales since about 2008, the year that Lehman Brothers collapsed and sparked the global financial crisis. Zhao said sales are unlikely to pick up much next year, with mortgage rates likely to remain at elevated levels.
“‘We’re in for a fairly prolonged freeze,’ she said.
“This year’s housing slowdown is very different from the previous one, after the housing bubble of the early 2000s burst. Back then, the economy entered a deep recession and millions of people lost their homes to foreclosure.
“This time around, home sales have been slowing for more than a year because of rising borrowing costs, record-high home prices and a very limited inventory of homes for sale.
“More recently, the speed at which mortgage rates have climbed is driving away all but the most committed home buyers. The average rate on a 30-year fixed mortgage rose to 7.57% last week, according to Freddie Mac. That is up about half a percentage point since August, when rates crossed above 7% for the first time in nearly a year and home sales fell to their lowest level since January.
“According to the Mortgage Bankers Association, purchase mortgages dropped in late September to their lowest levels since 1995, an indication that home sales will stay depressed in the coming months.
“Even in normal years, the housing market slows in the fall and winter-and prices usually decline from earlier in the year-as many families don’t want to move during the school year and buyers avoid shopping during the holiday season.
“If existing-home sales for the full year end up even lower than expected at fewer than four million, that would mark the first drop below that level since 1995, according to the National Association of Realtors.
“The shrinking housing market will likely send ripples through the whole economy.
“It could force some wannabe homeowners to keep renting. A rise in rent helped push up U.S. consumer prices in September and could make it harder for the Federal Reserve to end interest-rate increases if rents keep increasing.”