Staff Reports
In February, the housing market took a hit as new home sales fell by 0.3% from January, signaling the effects of higher mortgage rates that have been at multiyear highs for quite some time. The Census Bureau released a report on Monday that revealed the decline in new home sales to 662,000. However, despite the dip, the number of new home sales is still nearly 6% higher than last February, showing that people are still eager to purchase new homes despite the challenges posed by the housing market.
New home sales fall as mortgage rates weigh down housing market https://t.co/h9EUImqzst https://t.co/h9EUImqzst
— Washington Examiner (@dcexaminer) March 26, 2024
The median sales price for a new home in February was $400,500, marking the third consecutive month of decline and the lowest level since June 2021. This downward trend in prices indicates the impact of higher mortgage rates, as they were significantly lower during the pandemic. A housing expert at NerdWallet, Holden Lewis, pointed out that builders are feeling the pinch from the elevated rates, but they are still contending with the demand for new homes due to the limited inventory of pre-owned homes.
The surge in mortgage rates has caused a slight decrease in new home prices, which have fallen from their peak in October 2022. However, they are still approximately 30% higher than the lowest point at the beginning of the pandemic. It’s clear that changes in the housing market are directly linked to the fluctuations in mortgage rates and the Federal Reserve’s policies, which have shaped the current landscape for homebuyers and sellers.
The pandemic-era led to historically low mortgage rates, allowing people to secure incredible deals on homes. However, the Fed’s decision to tighten and raise interest rates has led to a significant shift, with mortgage rates hitting levels not seen in decades. As of Monday, the average rate on a 30-year, fixed-rate mortgage was just over 6.9%, illustrating the impact of the Fed’s policies and the resulting challenges for potential homebuyers.
The housing market has seen a decrease in existing home sales, down about 3.3% from last year and approximately 35% from their pandemic-era peak, which is causing a strain on both buyers and sellers. This challenging environment has made it difficult for many to navigate the housing market, as inflation and Fed policies continue to play a significant role in determining the direction of mortgage rates and home prices.
Despite the difficulties faced by the housing market, there has been a slight increase in housing starts, indicating a potential glimmer of hope for the industry. However, the overall situation remains complicated, with the Fed’s decisions on interest rates and inflation proving to be key factors in shaping the future of the housing market.
