Due to rising interest rates that drove up expenses for purchasers and discouraged many potential sellers with lower rates from moving, home sales in the US fell to their lowest point in almost 30 years. As a result of a limited supply that drove prices to all-time highs, just 4.09 million houses were bought, the fewest since 1995, according to the National Association of Realtors.

The group stated that they anticipated better market conditions in 2024.

However, it cautioned that the issue of affordability would persist. According to the National Association of Realtors (NAR), which releases the extensively monitored statistics on sales of existing homes—which make up the majority of transactions in the US—the median sale price increased by 1% in 2023 to $389,800.

After a spike in prices during the epidemic, the median price has increased by more than 40% since 2019.

NAR economist Lawrence Yun declared that increasing supply was “essential” in order to give renters a route to homeownership and that the current price increases were “unsustainable”.

“If price increases continue at the current pace, the country could accelerate into haves and have-nots,” he warned.

The US home market has experienced a sudden slowdown since the Federal Reserve began hiking interest rates in 2022 in an effort to reduce inflation.

US mortgage rates, which are normally fixed for a 30-year period, exceeded 7% last year for the first time in many years.

The actions put an end to a buying spree that had started when the central bank cut interest rates to stimulate the economy during the outbreak.

It has also resulted in a large split between prospective purchasers and current homeowners, many of whom have loans with rates below 4% and would incur significantly greater moving expenses. This is in contrast to other nations where loans with shorter periods or variable rates are more prevalent.

According to Yun, the market would bottom out in December. He pointed out that mortgage rates have been declining recently, hitting a record low of 6.6% this week. This is the lowest level since May.

Investors’ bets that the central bank will start to reverse course and lower rates later this year are the cause of the falls.

While it would boost demand, according to Oxford Economics’ head US economist Nancy Vanden Houten, rates are probably going to stay over 6%, which won’t be sufficient to attract a sizable number of sellers into the market.

“We expect a scarce supply of existing homes for sale to keep home price growth positive this year,” she said.

(Adapted from BBC.com)

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