Why the US housing market slowed at sharpest pace ‘since the financial crisis’

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The US housing market suffered its biggest downturn since the Great Recession in October as rising mortgage rates dampened demand, real estate company Redfin said in a monthly report this week.

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The number of pending home sales fell 32.1% year on year to 414,492 in October, the sharpest drop on record. rudd.

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In addition, a record 17.9% of sales dropped out of the contract during the month. The proportion of homes for sale that have lowered their listing prices has reached nearly 24%, double the rate in the same month a year ago.

“The Fed’s efforts to contain inflation are causing the housing market to slow down at a rate not seen since the financial crisis,” Chen Zhao, head of research at Redfin Economics, said.

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The surge in mortgage rates since January has caused a major correction in the US housing market this year. The average fixed rate on 30-year mortgages was 6.9% in October, more than double what it was a year ago and the biggest 12-month jump since 1981.

The housing market is undergoing a significant correction.
Bloomberg via Getty Images

The affordability crisis has caused a steady drop in home prices as sellers try to lure potential buyers back to the table. According to Redfin, the median selling price of homes sold in October fell 1.4% to $397,549, the biggest market drop in October since 2012.

However, the average selling price rose 4.9% year-over-year, highlighting the difficulty buyers face in coping with high monthly mortgage payments and abnormally high inflation.

house under construction
Rising mortgage rates suppressed demand in the housing market.
REUTERS

Inflation eased slightly in October when the Federal Reserve raised interest rates sharply. Further cuts could prompt the Fed to soften rate hikes and cut interest rates on long-term mortgages.

“There are already early but promising signs that inflation is slowing down, which led to mortgage rates falling last week. If this progress continues, buyers who recently backed out of deals may return to the market, and sellers may be less inclined to cut their prices,” Zhao added.

Houses for sale
Housing prices have begun to fall in many markets.
Bloomberg via Getty Images

Renowned economist Ian Shepherdson of Pantheon Macroeconomics recently told clients that the US housing market is “approaching a bottom,” according to The Post.

Shepherdson cited signs that mortgage rates have peaked as a sign that “demand will ease” in the coming months.

At the same time, he warned that the decline in house prices is likely to “accelerate” in the coming months as the market fluctuates in falling demand.

Credit: nypost.com /

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