House prices in the US fell in the second half of 2022 after demand for residential real estate weakened in several states and cities across the country. According to analysts’ estimates, house prices may continue to fall by up to 20% next year, while mortgage interest rates are climbing and the housing market is normalizing following the pandemic.
According to the estimates of Ian Shepherdson, chief economist at Pantheon Macroeconomics quoted on the CBS network, the drop in demand on the background of the saying that interest rates on mortgages are pushing prices down. “Our expectation is that house sales will continue to fall until the beginning of next year. At this point, they will already fall to the minimum level, when the only people who change housing will be those who are forced to do so because of work or family circumstances,” he said. Last month, home sales fell to 4.7 million, a 1.5% decrease compared to August – according to the National Association of Realtors (NRA).
Since the beginning of the year, interest rates on mortgages in the US have more than doubled. The average interest rate for a typical 30-year mortgage rose to 6.94% last week from 6.92% the week before and 3.2% in January. The average interest rate on a 15-year mortgage With a fixed interest rate it is now 6.23% compared to 2.33% a year ago.
The interest rate increases force homeowners to stop sales procedures because this will oblige them to take out a mortgage to purchase a replacement home. “It’s very possible that even if people want to purchase a cheaper home, their monthly mortgage payments will be larger,” Shepherdson noted. “This is a good reason to stay put, and therefore the supply is stifled.”
Economists predict that interest rates will continue to climb next year as the Federal Reserve Bank pushes up the cost of borrowing in order to moderate inflation. The interest rate on mortgages may even reach 8.5%, a figure that will shake the markets to a large extent – according to the NRA’s chief economist, Lawrence Yan, who said these things at a meeting of real estate investors earlier this month. There are also analysts who predict that the interest rate will reach level two – a writer
According to Realtor.com data, the sharpest declines in sales transactions were recorded in markets that gained great popularity during the Corona period, such as Austin, Texas. Residential real estate prices in the city, known for its music scene, thriving tech sector and progressive political leanings, have fallen more than 10% since June. Demand for homes in the city soared during the pandemic as many Americans abandoned big cities for smaller cities, while supply was in short supply. Momentum is driving up prices. Now, the number of vacant properties in Austin is increasing, and the median price of a home in September was $558,275. Other cities in the region known as the Sun Ring have also seen prices fall. For example, in Phoenix, Arizona, home prices have fallen by nearly 10% since June, with the median price now standing at $493,500. Other sharp declines at rates of about 8% were recorded in Palm Bay, Florida, Charleston, South Carolina, Denver, Colorado and Las Vegas, Nevada, where prices eroded by 7.9%.
A similar trend also occurs in Great Britain, which is currently in the midst of an acute economic and political crisis. In September, the number of houses sold dropped by almost 40%, this after the volume of transactions returned to normal levels following a sharp jump recorded during the Corona period, when reductions in purchase taxes were granted. At the same time, according to experts, the “real nightmare” in the residential real estate sector in the Kingdom has not yet landed. This is according to a report in the British “Guardian”.
Throughout the kingdom, 103.9 thousand transactions took place last month, 37% less compared to the same month last year, but almost the same as in August – according to data from the Revenue and Customs Authority (HMRC). According to the Authority’s report, the number of completed transactions has been stable in recent months, and higher compared to the period before the pandemic. However, the housing market was plunged into uncertainty following the scandalous “mini-budget” presented on September 23, which caused an increase in long-term mortgage prices Even before the crisis ignited by the budget, mortgages were on the trend of becoming more expensive following interest rate increases carried out by the central bank. However, following the presentation of the economic plan of the Liz Truss government, 1,700 transactions were cancelled.
The new mortgages are expected to become more expensive from now on. On Friday, the average interest rate on a two-year fixed-rate mortgage reached 6.55%, the highest since the 2008 crisis, while a five-year mortgage marketed at an interest rate of 6.43%. This is according to data from Moneyfacts.