Federal Reserve Chair Jerome Powell recently addressed the state of the US housing market, noting a concerning trend of weakness in the sector. This year has seen a lackluster performance in homebuying and selling, with only 3.96 million existing homes sold through October 2024, as reported by the National Association of Realtors. This places the year on course for the slowest pace of existing home sales since 1995.
The primary factors contributing to this subdued market activity are the persistently high home prices and stubbornly elevated mortgage rates. In October, the median home sales price stood at $407,200, marking the 16th consecutive month of year-over-year price increases. These escalating prices have deterred many potential homebuyers from entering the market.
Additionally, a significant portion of homeowners who secured lower mortgage rates prior to 2022 have been hesitant to list their properties for sale. This reluctance stems from the fact that selling their current homes would likely entail purchasing a new property at a higher interest rate, given the current average mortgage rate for a 30-year fixed loan, which was reported at 6.6% last week. According to the Consumer Financial Protection Bureau, nearly 60% of the 50.8 million active mortgages have interest rates below 4%, further illustrating the dilemma faced by many homeowners.
The combination of soaring home prices and elevated mortgage rates has created a challenging environment for both buyers and sellers in the US housing market. As policymakers and industry stakeholders continue to monitor these developments, it remains to be seen how the market will evolve in the coming months.
