In August, the sales of previously owned US homes fell by 2.5 percent, according to the National Association of Realtors (NAR). This drop in sales was expected, as analysts anticipated a decrease to an annual rate of 3.86 million homes. However, the chief economist of NAR, Lawrence Yun, remains positive about the future of the industry, stating that lower mortgage rates and increasing inventory will likely boost sales in the coming months. This positive outlook is supported by the fact that mortgage rates have decreased significantly, with the popular 30-year fixed-rate mortgage averaging 6.2 percent, the lowest level since February 2023.
Homebuyers in the US have been struggling with rising mortgage rates, which were raised by the US central bank in 2022 to control inflation. However, there is growing anticipation that the Federal Reserve will cut rates, leading to a decrease in mortgage rates. This shift has already begun, with rates dropping to their lowest levels in several months. As a result, economists like Nancy Vanden Houten of Oxford Economics predict an increase in home sales in the months to come, despite the current challenges faced by homebuyers. On the other hand, Oliver Allen of Pantheon Macroeconomics warns that current mortgage rates are still higher than the average, making it difficult for many homeowners to consider moving or taking out new mortgages.
Despite the decline in existing home sales compared to a year ago, the median home price in the US has increased by 3.1 percent, reaching $416,700. This increase in price is seen across all four regions of the country, indicating a strong housing market overall. While sales may be struggling, Yun emphasized that home prices remain high, reflecting the current demand for housing in the US. However, limited supply remains a significant obstacle for the industry, as there are fewer existing homes available for sale compared to previous years. This shortage of supply is likely to continue to impact sales in the near future unless more inventory becomes available.
The recent decision by the Federal Reserve to reduce interest rates by half a percentage point has further fueled expectations of lower mortgage rates. This move is seen as a positive step towards boosting the housing market and increasing affordability for homebuyers. Economists and industry experts are hopeful that this reduction in rates will encourage more buyers to enter the market and drive sales up in the coming months. However, challenges persist, particularly for current homeowners who may face difficulties in affording new mortgages due to the high rates. Overall, the outlook for the US housing market remains positive, with lower mortgage rates and increased inventory likely to support future growth and stability in the industry.
In conclusion, while existing home sales have faced a decline in August, the future of the US housing market looks promising. Lower mortgage rates and growing inventory are expected to provide a much-needed boost to home sales in the upcoming months. The recent decision by the Federal Reserve to cut interest rates has further fueled optimism in the market, with economists predicting a rise in sales in the near future. However, challenges related to high mortgage rates and limited supply remain barriers to growth in the industry. Despite these challenges, the overall outlook for the US housing market remains positive, with prices on the rise and demand for homes remaining strong. As the market continues to evolve, it is essential for policymakers and stakeholders to address these challenges and work towards ensuring a sustainable and thriving housing market for all.
