The high interest rates ensured that the US house sales were largely on hold last year. It could take a while for the market to experience a clear thawing phase.
The Americans bought a little more than four million houses from old ownership last year, said the National Association of Realors on Friday. That was the lowest value since 1995 and far below the annual pace of around five million, which was common before the Coronavirus pandemic.
Towards the end of the year, sales attracted a bit and rose by 9.3 percent in December in the previous year. This increase probably reflected the decline in mortgage interest in summer and early autumn-to an average of around 6 percent for a 30-year-old festival mortgage-which made houses more affordable for buyers.
Since then, however, the mortgage lenses have risen to around 7 percent again, and most forecasters do not expect that they will decrease sharply in the coming months. This is unlikely that this year is unlikely, said Charlie Dougherty, economist at Wells Fargo.
“You saw that the sales are wearing something, but they are still slow,” he said. “I don't think this is a sign that a really powerful or energetic relaxation is imminent.”
Real estate prices climbed on a sudden league during the pandemic, as the Americans were looking for more space and the low interest rates made borrowing easier. Real estate agents reported hectic bidding bidders when buyers competed for available houses.
This frenzy suddenly stopped when the rapid increase in inflation caused the Federal Reserve to raise interest rates to the highest level for decades. The interest rates for a 30-year-old festival mortgage rose from less than 3 percent at the end of 2021 to almost 8 percent two years later.
The combination of high prices and high interest rates made houses unaffordable for many those interested in buying. And owners, many of whom either bought their houses or refinanced their mortgages when interest rates were low, had hardly any incentives for sale. As a result, the stocks remained low and the prices remained.
There are indications that the real estate market could gradually normalize again, since life events – new jobs, new babies, marriages, divorces – force the owners to sell and get used to buyers. The inventory has risen slightly and surveys show that more owners are planning a sale.
But as long as the mortgage interests do not fall, this normalization process will probably progress slowly, said Dougherty.
“I think you can say with certainty that the home sales have reached a low point,” he said. But he added: “If you look at the overall level, it is still very, very weak.”