Alarm bells are already sounding for American homeowners as rising mortgage rates frighten away potential purchasers. According to experts, the housing market recession in the US will only get worse.
The effects of stress are now obvious. According to recent data, existing house sales decreased 24% in September, marking the longest reduction since 2007. This loss has now occurred for eight consecutive months. Starts for new homes dropped, and there were a 22% decrease in new house listings.
US Housing Market
The Federal Reserve, which is rapidly hiking interest rates to combat 40-year high inflation, is to blame for the failing housing market. Mortgage rates have now reached 20-year highs as a result of this.
Because of this, purchasing a home has become more expensive, which has caused purchasers to pull back - mortgage applications are at their lowest level since 1997. Demand has decreased in the meanwhile due to mounting worries about an impending recession, as per Insider.
In a recent interview, Jeremy Siegel, a professor of finance at the Wharton School, stated that he anticipates a 10% to 15% decline in house values, adding that this decline is accelerating to the downside.
In a different interview, he predicted that during the following 12 months, there would be the second-largest drop in home prices since the post-World War II era, which would have a huge impact on wealth and equity in the housing market.
The majority of a household's balance sheet is made up of residential real estate and stocks, according to David Rosenberg, the head of Rosenberg Research and an experienced economist, in an interview with RealVision that was published this week.
US House Prices
The expert cited the Fed's attempts to tighten monetary policy in order to reduce inflation from its current rates of 8-9% to its aim of 2%. Nobel Prize-winning economist Paul Krugman concurs that a severe slump is imminent, but he anticipates that it will take some time before increased interest rates actually have an impact on property prices and demand.
The number of purchase contracts that were canceled last month was over 60,000, or 17% of the residences that were put under contract. In New Orleans, where costs decreased by 5.7 percent, there were the largest drops.
Oakland and San Francisco, both in California, came in second and third, respectively, with losses of 2.1 and 1.9 percent. More than two-thirds (67.8%) of houses listed for sale in Boise, Idaho, witnessed the largest metro-wide price decreases in September. According to Daily Mail, the largest increase in pricing was in El Paso, Texas, where the average price increased by 23 percent to $245,950.
Prices increased by 22.2% in West Palm Beach, FL, followed by 19.3% in Greenville, SC, and 17.6% in Miami. Under the current mortgage rates, a typical American family earning $71,000 can only afford a one-bedroom, one-bathroom apartment in Manhattan; meanwhile, under the previous mortgage rates, they could have bought a three-bedroom apartment.
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