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U.S. home sales both of the listings fell over 20% in September - the biggest drop since the start of the pandemic. But houses are still getting more expensive. Here's how

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U.S. home sales both of the listings fell over 20% in September – the biggest drop since the start of the pandemic. But houses are still getting more expensive. Here’s how

According to the latest data from real estate broker Redfin, the slowdown in the housing market largely continued in September. Both home sales and listing numbers have dropped this month, signaling that buyers and sellers are thinking twice about making a move.

The drop was the furthest recorded outside of the March 2020 drop.

The number of homes sold fell an astonishing 25% year-over-year, and new listings fell 22%. Still high prices combined with high interest rates create a toxic mix of unaffordability – and worse yet, uncertainty about the future.

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Things are still expensive and getting more expensive

The average 30-year fixed mortgage rate is now almost 7%, more than double what it was at the beginning of the year and a 20-year high. However, the prices did not fall that much.

About a quarter of homes for sale in September saw a price drop, but the median price was still 8% higher than in September 2021.

These high interest rates and steep prices mean that both homebuyers and current homeowners are hesitant to commit.

You can see why buyers are delaying: If you bought an average home now, your monthly mortgage payment would be 55% higher than if you bought it in early 2022, according to Zillow.

Read more: ‘The numbers don’t work’: Rising mortgage rates cause some home buyers to give up, while others think they’ve found a workaround

According to Zillow, this causes the nation’s median households to spend 30% of their income just on principal and interest payments when buying a house, making them a “house burden”. And that 30% excludes everything else that comes with hosting: taxes, insurance and maintenance.

High costs result in losing deals

Nearly 60,000 deals were canceled in September – that’s 17% of all houses under contract. It’s not just buyers who attract, it’s sellers too.

According to another report by Redfin in September, 85% of homeowners have a locked mortgage rate well below the current rate and are concerned that their next rate could be a few percentage points higher if they sell. This contributes to keeping people in place, fewer homes on the market, which keeps prices high – almost like a housing stalemate.

And this is a problem that may persist in the long run as fewer new builds may come to market. According to the National Home Contractors Association (i.e. excluding spring 2020), home builder confidence hit a 10-year low in October. It dropped eight points this month to 38.

While some say the market has become more balanced, Robert Dietz, chief economist at the National Association of Home Builders, doesn’t think so.

“The reality is that the homeownership rate will decline in the coming quarters as higher interest rates and continued high construction costs continue to price out a large number of prospective buyers,” Dietz said in a press release.

What to read next

  • Should I wait for the housing market to drop before buying a home? 3 reasons why this housing crisis isn’t like 2008

  • ‘There have been tough and scary times’: Baby boom finance experts living in the era of Great Inflation talk about ways to survive a recession

  • Here’s how much the average 60-year-old American keeps in retirement savings – how’s your nest egg?

This article provides information only and should not be construed as advice. It is provided without any warranty.

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