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According to data published this Tuesday by the National Association of Realtors (NAR), US existing home sales fell 2.2% in July compared to the previous month amid high mortgage rates.
For Lawrence Yun, chief economist at NAR, there are two main factors that have been driving current sales activity “inventory availability and mortgage rates. Unfortunately, both have been unfavorable to buyers.”, said.
This last figure shows that existing home sales are down 16.6% compared to July 2022 and according to these estimates it will take approximately 3.3 months to deplete this inventory taking into account its current rate.
The analyst further noted that “most homeowners continue to enjoy large capital gains in recent years and they have little concern about falling home prices. However, many renters are concerned that they face increasing affordability challenges due to high interest rates.
The report indicated that by the end of July there were close to 1.11 million homes for sale, this is 14.6% less than a year ago. Homeowners don’t want to risk selling their property at today’s high mortgage rates.
The Fed’s aggressive policy
Since inflation spiked in the middle of last year, the Federal Reserve has aggressively pushed it to rein in inflation and bring it to 2%, but the last 11 interest rate hikes have also pushed mortgage rates even above 7% a figure not seen for two decades this brought as a consequence the cooling of the real estate market.
In the last report presented by Freddie Mac the rates of the popular 30-year fixed mortgage were around 7.09% more than the 5.13% registered last year and well above the 3.9% before the pandemic.
Sam Khater, chief economist at Freddie Mac noted that “the economy continues to perform better than expected and the 10-year Treasury yield has risen, causing mortgage rates to rise. Demand has been hit by affordability hurdlesbut low inventory remains the root cause of stagnant home sales,” he said.
Keep reading:
- US new home construction rose 3.9% in July
- Mortgage rates reached 7.9%, the highest level in more than 20 years
- Real Estate Revolution: Why Americans Put Off Buying Their Homes