Bloomberg News reports that the US housing market slump has spilled over into the fifth month. This has caused the prices to drop by 2.5% since they attained a peak in June.
The prices were also declining 0.3% in November from what I was just a month ago, as per seasonally adjusted data of national prices from the S&P CoreLogic Case-Shiller.
What has Caused the Chill in the US Housing Market?
The run-up in mortgage rates in the past year has caused a chill in the housing market. This has led to the worst slide annually in the sales of previously owned houses in more than ten years.
This has caused pressure on the prices, mainly in those parts of the country like San Francisco where the affordability factor was stretched already from before. It was found that prices in this California city were lower by 1.6% from what they were a year earlier. This is the largest year-over-year drop in more than a decade.
As stated by Craig Lazzara, the managing director associated with S&P Dow Jones Indices, as interest rates are being moved higher by the Federal Reserve, mortgage financing has continued to be the headwind for the price of homes.
He also revealed that the economic weakness comprising the probability of a recession would also strain prospective home buyers. Keeping in mind these aspects related to a quite challenging macro environment, the price of homes may continue to become weak.
Prices continue to be higher than what it was one year ago, and this has allowed homeowners to seek benefits from the ripple effects related to a pandemic boom that is extended. It may be recalled that this boom had broken records in several parts of the United States but has maintained a slower growth. Bloomberg News states that the prices registered an upward trend of 7.7% annually in November, yet down from a 9.2% gain in October.
A Respite
The borrowing costs have eased down a bit recently. The average on a 30-year fixed mortgage plunged to 6.13% during the latter part of January, as revealed by Freddie Mac. Aside from this, Redfin Corp., the brokerage and data company, hinted at probable signs that it is quite likely that buyer interest might be surging again. There are pending deals rising in December and other aspects related to demand climbing.
Bloomberg news also reports that George Ratiu, who is the Senior Economist at Realtor.com, noticed that there had been an adjustment in the housing market since November. Not only that, the price growth has been moderating, and the sale of homes has also been surging.
Ratiu also noted that the dynamics of demand and supply had given a stronger footing to the buyers since the beginning of 2023, offering them much-needed leverage while at the negotiation table.
