In August home sales continued their downward slope for the seventh straight month.
- Home sales are in the longest stretch of decline since 2007 as mortgage rates continue to climb.
- With interest rates to rise again, home sales are expected to continue their decline. First-time buyers in particular are forced out of the market, unable to afford the current rates. Existing homeowners are choosing to stay where they are.
- Construction on new homes has declined along with purchases on house-related items like furniture.
Why it’s news
As long as interest rates remain high, housing sales are likely to continue to slow. Buyers just can’t afford an increase in monthly costs.
Existing home sales fell .4% from July to August. Compared to a year ago, sales have dropped 19.9%.
The Federal Reserve’s attempts to bring down inflation by raising the interest rates are the main cause behind the slowing housing market. The Fed raised interest rates .75 percentage points again Wednesday.
High interest rates have led to 6% mortgage rates, forcing many buyers out of the market, a sharp contrast to the hot housing market that followed the pandemic. The recently adjusted interest rates are likely to affect the housing market even further.
One bright spot for buyers is that the high mortgage rates have lessened demand, meaning housing prices are beginning to fall somewhat.
Median home prices declined 7.7% from a year earlier in August, though prices are still high compared to pre-pandemic levels.