Last month, existing home sales fell in the U.S. for the seventh consecutive month as affordability continued to worsen due to rising mortgage rates and persistently high home prices, though the rate of loss slowed from previous months.
The National Association of Realtors said on Wednesday that existing home sales decreased 0.4% last month to a seasonally adjusted annual rate of 4.80 million units. This was the lowest sales level since November 2015, except for the decline in the spring of 2020.
The housing market has been severely impacted by the Fed's aggressive tightening of monetary policy, which is manifested in excessive interest rate hikes. In contrast, despite the Fed's efforts to cool demand, other areas of the economy, such as the job market, have exhibited resilience.
"High prices and Fed rate hikes will likely remain constraints for sales going forward," said Rubeela Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York.
Due to the high rates, the median American household would need to spend 44.5% of their income to make payments on a median-priced property in the U.S., according to data shared by Compound Capital Advisors CEO Charlie Bilello. This is the highest percentage on record dating back to 2006.
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When will housing costs fall?
Double-digit house price drops are occurring in frothy countries like Australia and Canada, and economists predict that the global downturn is just getting started.
“We will observe a globally synchronized housing market downturn in 2023 and 2024,” said Hideaki Hirata of Hosei University, a former Bank of Japan economist. He warns the full impact of this year’s aggressive rate hikes will take time to play out for households.
“Sellers often overlook signs of shrinking demand,” Hirata said.
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