U.S. Home Sales Decline Despite Inventory of Properties Hitting Highest Levels Since 2008

by Joe Rutland
(Photo Courtesy Getty Images)

U.S. home sales took a dip despite the inventory of numerous properties being at the highest level since 2008. What’s going on here? According to the Commerce Department, rising mortgage rates and higher house prices played a role in this decline. This combination is putting the squeeze on first-time homebuyers who are in the market. It also turns people away from wanting to possibly make a move from one house to another.

What To Know

  • Sales of new homes in the U.S. decreased by 2 percent.
  • Despite this, U.S. home sales remain above pre-pandemic level.
  • Sales were up by 59.3 percent in Northeast; down 13 percent in West.

U.S. Home Sales Remain Up From Their Pre-Pandemic Level

It’s the second straight month of declining sales. Still, they were staying above a pre-pandemic level. Now, economists did see reduced affordability curbing activity in the near term. They expect the new U.S. home sales market to plod along this year. Why? There’s pent-up demand, a record low inventory of previously-owned homes, and strong wage gains.

“With interest rates climbing further because of the negative supply shock emanating from the Russian invasion of Ukraine, home sales are likely to trend lower in coming months,” David Berson, who is the chief economist at Nationwide in Columbus, Ohio, said. “But unless mortgage rates spike or the economy stalls or worse, the falloff in new home sales should be modest.” We get more from Reuters.

New U.S. home sales decreased 2 percent to a seasonally adjusted annual rate of 772,000 units last month. Looking at January’s sales pace, it was revised down to 788,000 units from 801,000 units. Additionally, sales surged 59.3 percent in the Northeast and increased 6.3 percent in the Midwest. But they fell 1.7 percent in the South and tumbled 13.0 percent in the West.

Mortgage Rates Are Rising Upon Federal Reserve Moves

Mortgage rates did rise in February and are still going up. This comes after the Federal Reserve last week raised its policy interest rate by 25 basis points. This was the first rise in more than three years and it lays out an aggressive plan to push borrowing costs to restrictive levels by 2023.

Want some more mortgage news? Here you go. The 30-year fixed-rate vaulted 23 basis points to a three-year high of 4.50 percent last week. That is from the Mortgage Bankers Association showed on Wednesday.

Mortgage rates remain low by historical standards. But strong house price inflation has combined to significantly increase the typical monthly mortgage payment. “Mortgage payments as a share of median family income have risen above 20 percent for the first time since late 2007,” Matthew Pointon, senior property economist at Capital Economics in New York, said.