2/20/2023 0 Comments New home inventory![]() Higher mortgage rates are driving a pullback in mortgage demand as applications for purchase have fallen about 30% from their peak in January. Reduced affordability is taking a toll on home buyer sentiment. Much of the decline in sales are due to the sharp rise in mortgage rates over the past seven months. Existing-home sales have fallen every month since February and are down more than 22% from a year ago. Sales of previously owned homes fell 5.9% in July. The year-over-year gain peaked at 24.2% in August 2021.Įxisting home sales have further to fall and will be down 11.6% in 2022. The median price of a new home rose 5.9% in July and it’s up 8.2% from a year ago. The surge in new home inventories is helping moderate home-price growth. Higher mortgage rates have caused many potential buyers to cancel contracts or delay plans to buy a home, as they can no longer afford higher monthly payments. The decline led the inventory of new homes to increase to the highest level since March 2008. New home sales have fallen in six of the past seven months. New home sales fell 12.6% in July to a seasonally-adjusted annual rate of 511,000 units – the slowest pace in more than six years. New-home sales are on track to fall 16% in 2022. Multifamily starts, fueled by low vacancies and rising mortgage rates, will rise 15% from 2021. Total permits continue to outpace total starts, suggesting a collapse in residential construction is unlikely this year even as mortgage rates remain above 5%. This suggests further moderation in single-family construction this year. Total housing permits, which lead starts by a month or so, fell 1.3%, with single-family permits falling for the fifth month in a row. Builders are still having trouble completing new projects amid ongoing labor and supply shortages. Single-family starts have stumbled over the last few months as surging mortgage rates have dampened demand for homes. ![]() Single-family starts fell 10.1%, while multifamily starts dropped 8.6% for the month. Total housing starts fell 9.6% to 1.446 million annualized units in July. The drop in house-price growth will reduce builders’ willingness to start new projects this year. Buyer traffic has fallen, inventories have risen, and sellers are increasingly reducing asking prices. After two years of record growth, the housing market has reached a turning point as elevated home prices and surging mortgage rates weigh on affordability and demand. ![]()
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