The housing market is experiencing another storm according to Jerry Howard, the CEO of the National Association of Home Builders.
Currently, home sales have dropped significantly lower than expected in July. The sales have been the lowest they have been in 6 years. This in part is driven by the high mortgage rates and the increased home values which could keep others outside of the housing market.
New single-family home purchases have seen a great drop of 12.6% according to the Commerce Department reports published on Tuesday. This would mark the sixth month of decline. However, new home sales are only a small part of the total sales, which also dropped by 2.5% in the last month.
This means that within a year, new home sales have dropped by 29.6%.
Despite these low rates of purchases, the costs for new homes continued to rise, as the prices increased by around 9% in July.
This decline in home sales is evidence that the market is slowly starting to cool down after the Federal Reserve increased the interest rates at a swift pace to reduce the pace of inflation rates increasing. Policymakers have also made the necessary moves so that another increase in the rates can potentially take place in September.
After the rate spikes, the average rate on a 30-year fixed mortgage, which is one of the most popular home loan types, increased to 6% in June. However, there have been moves to moderate that increased rate, which on Aug. 18 appeared to be around 5.13%. The average rate for a 30-year fixed rate mortgage hovered around 5.13% for the week ending Aug. 18. Still, this is almost double when compared to last year’s rate of 2.86%.
This alongside the increased home prices has kept entry-level home buyers from being able to purchase a home in this market. A Redfin report also showed that home sale cancellations have also repeatedly occurred in the last month, with 63,000 agreements being called off.