New Single Family Home Sales Plummet
Sales of new single-family homes in the U.S. dropped unexpectedly by 11.3% in May, marking a six-month low, according to the latest report from the Commerce Department.
Record Low Home Contract Signings
The National Association of Realtors reports that home contract signings have also reached a record low.
Factors Driving Down Demand
Economists attribute the decline in home sales to high mortgage rates, which have significantly increased the cost of borrowing. During the pandemic, mortgage rates hit record lows, allowing many homeowners to refinance. As a result, these homeowners are now reluctant to give up their low rates. Additionally, despite the high rates, home prices remain elevated due to low inventory, creating a challenging market for buyers.
Market Conditions and Challenges
The combination of high prices and low inventory has created an unusual market situation. Typically, high interest rates would lead to lower home prices, making purchasing a house more attainable. However, the current scenario has insulated homeowners from selling, resulting in a stagnant market.
Slight Improvement in Inventory
In April, the number of available homes for purchase rose slightly, providing a silver lining for potential buyers. This increase in inventory has led to some softening in prices, with homes starting to sell for under asking price for the first time in a long while.
Future Market Outlook
Experts suggest that waiting until August could potentially yield better deals for buyers, as there may be anxious sellers willing to lower prices. However, this strategy carries the risk of increased competition as the market loosens up.
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