U.S. Housing Market Freezes Amid 7% Mortgage Rate Fear... Transactions Hit 14-Month Low

【Financial News New York = Correspondent Lee Byung-chulU.S. housing transactions have fallen to their lowest level in over a year. As U.S. Treasury yields soar following the war in Iran and mortgage rates once again approach 7%, homebuyers are pulling out of the market. A peculiar phenomenon is also continuing where housing prices continue to rise despite frozen transactions.
According to the National Association of Realtors (NAR) on the 10th (local time), U.S. existing home sales in August recorded an annualized rate of 3.98 million units, down 2% from the previous month. This is the lowest level in 14 months since June of last year, when 3.93 million units were recorded. It also decreased by 1.2% compared to the same month last year.
The U.S. housing market has effectively failed to escape sluggish trading for the past four years. In particular, the simultaneous rise in U.S. Treasury and mortgage rates, driven by growing inflation concerns stemming from rising international oil prices following the war in Iran, has dealt a direct blow.
The 30-year fixed mortgage rate, which serves as the benchmark for home mortgages, rose to an average of 6.71% last week, jumping to its highest level in over a year. While it was below 6% as recently as February, it is now threatening the 7% mark again.
A bigger problem is that housing prices are not falling despite the sharp decline in transactions. The median price of existing homes in August was $429,100, up 1.6% from the same month last year. This is an all-time high for the month of August.
However, the shortage of listings is gradually easing. In August, the inventory of unsold homes stood at 1.62 million, up 3.2% from the previous month and 5.9% from the same month last year. Based on the current sales pace, this amounts to 4.9 months' worth of supply.
However, if high interest rates persist, a recovery in the housing market is also expected to be difficult. Brad Case, chief housing economist at Homes.com, told The Wall Street Journal (WSJ), "For mortgage rates to fall, uncertainty would have to decrease significantly, but I do not see that situation coming." As long as concerns over the Middle East war, inflation, and the U.S. fiscal deficit continue to push up Treasury bond yields, the burden of homeownership for Americans is likely to persist for the time being.


[email protected] Correspondent Lee Byeong-cheol Reporter