The U.S. real estate market is on track to sell the least number of homes since 2008, when Americans were engulfed in the subprime mortgage crisis and the Great Recession, according to The Wall Street Journal.
The number of total existing-home sales is projected to reach only 4.1 million by the end of 2023, the lowest since around 2008, when the world was embroiled in a global financial crisis, despite a higher U.S. population, according to the WSJ. Mortgage rates are currently at their highest point since the year 2000, with the 30-year fixed-rate mortgage averaging 7.57%, bringing purchasing demands for housing to a three-decade low, according to Freddie Mac. (RELATED: Runaway Inflation ‘Unlikely’ To Be Reeled In Under Biden Administration, Experts Say)
“The market has definitely started slowing,” Steven Fischer, a real estate agent in Savannah, Georgia, told the WSJ. “Everyone’s doing open houses, everyone’s doing price reductions, and now sellers are offering a lot of incentives to get buyers to buy their house.”
In an indicator that home sales will stay low for the coming months, purchase mortgages dropped to their lowest point since 1995 in September, according to the WSJ. Housing sales also typically seasonally decline during the fall and winter, meaning that existing home sales for the full year could drop below levels seen in 1995.
Unaffordable housing hits a record high. Even worse than 2006 — just before the Global Financial Crisis.
In US cities it now takes between half and two-thirds of income to own a house. In San Francisco it’s 84% 🤯
Washington’s trillions broke housing. With no end in sight. pic.twitter.com/lDQV5KSXdN
— Peter St Onge, Ph.D. (@profstonge) October 15, 2023
The faltering home sales could mean more Americans will have to continue or start renting their living spaces, which could push up prices as supply tightens, leading to inflation, according to the WSJ. The economy may face further depressing effects, like a lack of new home construction and fewer home appliance purchases, that would dampen growth.
Housing affordability has also sunk over the past year, reaching its lowest level since 1985 this past summer, according to the WSJ. The high unaffordability is unlikely to end as prices continue to increase despite rising mortgage rates.
Mortgage rates are feeling the effects of the Federal Reserve’s federal funds rate hikes, which have brought the rate to a range of 5.25% and 5.50% after a series of increases that started in March 2022. The Fed has raised rates in an attempt to squash persistently high inflation, which has remained far above the target rate of 2%, measuring at 3.7% in September.
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