The once-booming housing market is bracing for a significant downturn, with home sales plummeting close to 2008 recession-era as rising mortgage rates and stubbornly high prices squeeze out buyers.
- Nearly 40% of homebuyers under 30 received help with down payments from family.
- The average 30-year fixed mortgage rate topped 7% in October for the first time in over 20 years, more than double 2021 rates.
- Median existing home prices increased 7.7% in August from last year to $389,500, though prices are declining in some regions.
Why It Matters
The weakening housing sector signals concern for the broader economy. Real estate has been a rare bright spot amid high inflation and recession fears but is now faltering as rates price out buyers.
Beyond impacting prospective homeowners, the decline may also hurt related industries like furniture, appliances, remodeling, etc.
Plunging existing home sales, a key metric of housing health, are approaching May 2020 lows, aside from the brief pandemic plunge. New listings also keep falling, extending months of declines and preventing steeper price drops due to tight supply.
With mortgage rates poised to remain high in the near term, a meaningful housing recovery may not come before late 2023 or 2024. A return to the frenzied pandemic market appears improbable per experts, even with an eventual rebound.
The developments underscore concerns about the economy’s health amid rapid rate hikes intended to tame inflation. Further cooling of the once red-hot real estate sector could have ripple effects. Americans’ net worth is closely tied to home values.