A combination of factors, including high interest rates, inflation and concern over the national economy have largely affected the American housing market. The current situation may be another signal of potential political challenges for President Joe Biden as he begins his 2024 reelection campaign.
The current rate of house sales is near its lowest point since the Great Recession.
In July, home sales increased while prices declined, showing the potential of the housing market going through a significant change. Home sales increased by 4.4% while overall new home prices declined by about 9% to almost $437,000.
Existing home sales fell by more than 2%. Overall rates for these homes are down almost 17% year-over-year.
Furthermore, figures from earlier this year have shown similar weaknesses. January 2023’s sales were almost 40% lower than those in January 2022. Sales figures for existing homes fell for the 12th straight month in January, which was the lowest rate in almost 13 years.
The data from the National Association of Realtors shows that 4 million homes changed hands that month.
Furthermore, home prices continued growing, showing that the housing market may remain too expensive for a number of potential buyers. Overall home prices increased 1.3% to an average of $359,000 earlier this year.
The change in buying habits may be the result of the Federal Reserve’s efforts to lower inflation. The Fed has increased rates significantly over the last two years, and mortgage rates have reached a more than 20-year high in recent months.
The average rate for a 30-year home loan is now more than 7%, almost two percentage points higher than the average rate this time last year. The current rate is almost double that available two years ago.
Home sales fell in July for the fourth time in five months, extending one of the deepest housing slumps in recent memory https://t.co/Ggtg9J1RiM
— The Wall Street Journal (@WSJ) August 22, 2023
Rates have also consistently increased week to week, often making the home purchase process more difficult for buyers. The Federal Reserve is further discussing increasing interest rates, which could further complicate the housing market and drive more prospective owners out of the market.
Higher inflation rates have also led to higher costs of owning homes and increased costs of construction materials used for new house construction.