In the US, sales of previously owned homes increased 1.2% in October. They set a seasonally adjusted annual rate of 4.1 million units. This is the second month in a row of increasing home sales, a sign of a slow but steady climb upward over the last several months. Yet even with this positive trend, existing home sales are still lethargic by historical standards as affordability is still a major hurdle.
In October, we observed a modest uptick that mirrors an overall recent upward trend in mortgage applications for home purchases. This means that would-be home buyers are beginning to adjust to the new normal for the housing market. High homeownership expenses are the major factor depressing resale activity. With nominally high prices, many would-be buyers are pushed away by these elevated prices combined with high-interest rates.
Analysts are proclaiming a huge comeback with last month’s surge in existing home sales. They don’t expect a significant recovery anytime soon. The impact of prevailing mortgage rates, which are still high and pushing down buyer sentiment and squeezing the overall housing market, are still very much at play. Experts predict that these rates will not ease significantly over the next few years, further complicating the housing landscape for potential buyers.
Moreover, the “mortgage lock-in effect” persists, with many homeowners unwilling to sell their properties and relinquish lower mortgage rates for new loans at higher rates. Yet this trend exacerbates the supply of homes available and overall worsens an affordability crisis plaguing the housing market.
Despite these challenges, some industry experts remain optimistic about a gradual improvement in existing home sales over the coming months. They feel that once the economic environment becomes more stable, buyers will become more willing to jump into the market. They’ll be doing so from a low base. There are some headwinds on further existing home sales as high costs of homeownership bite. On top of that, high mortgage rates will provide even more squeeze.