U.S. Existing-Home Sales Expected to Hit Lowest Levels in Over a Decade
Introduction: The upcoming existing-home sales report for December is anticipated to reveal a decline in sales of previously owned homes, marking the lowest levels in at least 15 years. Economists suggest that a combination of affordability challenges and a limited supply of homes has contributed to this downward trend.
Sales Projections: Economists surveyed by The Wall Street Journal estimate a modest 0.3% increase in seasonally adjusted existing-home sales for December compared to November. However, despite this small uptick, the full-year figures for 2023 are expected to reflect the lowest existing-home sales since the financial crisis of 2008. If these sales fall below the 2008 level, it would signify the lowest point since 1995.
Factors Contributing to Decline: Several factors have contributed to the decline in existing-home sales. High mortgage rates and escalating home prices have rendered home purchases increasingly unaffordable for many potential buyers. Despite the decrease in demand, the supply of homes for sale has remained low, preventing a significant drop in prices. Homeowners with low mortgage rates have opted to stay in their current homes, deterred by the high costs associated with buying a new house at a higher interest rate.
Release of December Existing-Home Sales Report: The National Association of Realtors is scheduled to release the December existing-home sales report at 10 a.m. Eastern time on Friday. This report is expected to shed light on the culmination of purchase decisions made in November and October, reflecting the state of the housing market during that period.
Changing Mortgage Rates: Mortgage rates, which reached a 23-year high in October, have experienced a notable decline of more than a percentage point since then. This drop has prompted a resurgence in home-shopping activity, as buyers seek to capitalize on the more favorable interest rates. Real-estate agents report an increase in demand, indicating latent market demand that is expected to contribute to future housing activity.
Outlook and Analyst Comments: Real-estate experts, such as Sam Khater, Chief Economist at Freddie Mac, express optimism about the potential for increased housing market activity. Khater notes the existence of significant latent demand in the market, with prospective buyers eager to enter the housing market amid improved affordability conditions.
Conclusion: The impending existing-home sales report is poised to offer insights into the challenges faced by the U.S. housing market, emphasizing the delicate balance between affordability, supply, and demand. As the market navigates changing interest rates, economists and industry experts closely monitor indicators to gauge the trajectory of the real estate landscape in the coming months.
