The US housing market is historically unaffordable, and home sales and inventory remain low. National Association of Realtors data shows existing-home sales are down 16.6% from last July. At the same time, total housing inventory is 14.6% lower compared to a year ago. Loading Something is loading.
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Americans are facing a historically unaffordable housing market thanks in part to the Fed’s high interest rates and a decade of under-supply of homes across the US.
Home prices have remained stubbornly high even with mortgage rates hovering near a two-decade peak, and confusing supply and demand dynamics have left economists split on the outlook for next year and beyond.
Current home owners that locked in lower mortgage rates during the pandemic or earlier are now unwilling to move. That subtracts both supply and demand from the market, and leaves other house hunters — who face new, higher rates — sidelined with fewer options.
Two key statistics illustrate just how tight the landscape has become over the last 12 months.
First, total existing home sales declined 2.2% in July to a seasonally adjusted rate of 4.07 million, according to a Tuesday report from the National Association of Realtors.
A couple percentage points may not sound significant, but year-over-year the figure is down 16.6%. Last July, total existing home sales stood at 4.88 million.
The second stat ties directly into the home sales figures; total housing inventory is down 14.6% from compared to a year ago, according to the NAR.
“Two factors are driving current sales activity – inventory availability and mortgage rates,” NAR chief economist Lawrence Yun said Tuesday. “Unfortunately, both have been unfavorable to buyers.”
At the end of July, there were 1.11 million units registered, per NAR, for total housing inventory. That’s 3.7% higher from June, but is still a far lower reading from last July, when there were 1.3 million units registered.
At the current sales pace the housing market offers a 3.3 months’ supply of unsold inventory, up from 3.1 months in June and just above the 3.2 months seen last July. Goldman Sachs strategists don’t expect the lack of affordability to change anytime soon.
In an August note, they pointed to inventory snags as one reason home prices will increase 1.8% in 2023. They revised a prior forecast of a 2.2% slide in home prices.
“New listings,” Goldman Sachs said, “are being added at the lowest pace on record, driving positive net absorption even amid paltry purchase application volume.”