New home sales fell in September to a seasonally adjusted annual rate of 603,000, down 10.8% from August and 17.6% YOY, according to data from the U.S. Census Bureau and the Department of Housing and Urban Development.
The month-over-month figure is slightly better than expected. Economists polled by The Wall Street Journal predicted home sales to fall 13.4%.
The seasonally‐adjusted estimate of new houses for sale at the end of August was 462,000, representing a supply of 9.2 months at the current sales rate.
September saw mortgage rates soar from the high-5%s to nearly 7% at month’s end, pricing many potential buyers out of the market.
Home shoppers who could have afforded a mortgage payment earlier this year now may not be able to afford one at all.
Plus, the volatility of the market has some buyers “frozen” even if they can afford a higher rate.
As buyers dwindle, home sellers who enjoyed high competition last year are having to adjust their expectations.
“We’re seeing sellers sitting on the market longer, we’re seeing more price reductions because buyers are a little more hesitant… we are also seeing sellers paying closing costs for buyers,” Ken Kaplan, “The No Bull Agent,” told Fox News.
Kaplan noted that sellers paying closing costs is something he hasn’t seen “in many years.”
Home listing price cuts reached a record high of 7.9% last month as homebuyer demand fell 25% from a year earlier.
“Just north of Austin, TX, there’s a home that listed four months ago for $675,000. In these four months, it’s gone down to $610,000, and it also includes a seller concession of $5,000 towards closing costs because they need to move it, “ Claudia Lawrence of Vortex Realty told The Mortgage Note.
Home affordability and the direction of the housing market are being analyzed heavily.
At the National Association of Real Estate Editors conference earlier this month, Chief Economist Lawrence Yun of the National Association of Realtors said that in 2023 unit sales will be down if interest rates remain high.
But Yun said history is not bound to repeat itself because there is not the same level of inventory on the market.
“The repeat of a 30% price decline is almost highly, highly unlikely. Will some markets see a price decline? Yes. Because I believe that next year, nationwide, price forecasts will be about zero. That means half of the country will see some price decline. The other half of the country will see some price increases,” Yun said.
Yun said Midwest and Southern states are more likely to weather the storm, while markets such as California are more likely to see a price decline.
Editor Kimberley Haas contributed to this report.
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