The Housing Market is Heading for the Slowest Year Since Subprime Crisis
October 16, 2023
The highest mortgage rates in more than two decades are dragging home sales to the lowest levels since the subprime mortgage crisis.
Sales of previously owned homes, which make up the bulk of sales activity, in 2023 are on track for the lowest number since at least 2011, when the country’s population was smaller and the economy was still recovering from one of the worst economic slowdowns since the Great Depression.
Economists from real estate brokerage Redfin estimate that the year’s total existing-home sales will amount to roughly 4.1 million, which would be the smallest number of sales since 2008. Redfin estimates that sales are unlikely to pick up much next year as mortgage rates are expected to remain at elevated levels.
The average rate for a 30-year fixed mortgage hit 8% this week, the highest level since 2000. Rates have risen sharply in recent weeks. Rates first topped 7% in August, and the speed at which mortgage rates have climbed is driving away all but the most committed home buyers. Potential sellers are locked into significantly lower rates, and so they are keeping their homes on the market, reducing already stretched inventory and driving up prices for the few homes on the market.
According to the Mortgage Bankers Association, demand for mortgages to purchase homes (rather than refinances) dropped in late September to their lowest levels since 1995, an indication that home sales are likely to stay depressed in the coming months. Some projections show that the year’s existing home sales could end up lower than 4 million, which would be the lowest level since 1995, according to the National Association of Realtors.