US Home Sales Slump: The Six-Month Low Explained and What Should You Do as a Buyer?
- Author: Sadie Krajcik
- Posted: 2024-06-28
The US housing market has experienced a significant downturn, with home sales hitting a six-month low.
According to the National Association of Realtors (NAR), existing-home sales fell by 3.4% in May 2023, marking the fourth consecutive month of decline.
The seasonally adjusted annual rate now stands at 5.41 million units, the lowest since November 2022. Rising mortgage rates and high home prices are major contributors to this slump.
Rising Mortgage Rates and Affordability
One of the primary factors driving the decline in home sales is the rise in mortgage rates. The average rate for a 30-year fixed mortgage has surged to 5.78%, up from 3.11% at the end of 2021.
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This significant increase has priced many potential buyers out of the market, making homeownership less affordable.
Higher mortgage rates translate to larger monthly payments, which can strain household budgets and deter prospective buyers.
High Home Prices Continue to Impact Buyers
In addition to rising mortgage rates, persistently high home prices are another hurdle for buyers.
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The median existing-home price for all housing types in May was $408,600, a 14.8% increase from a year ago, according to the NAR.
This combination of high prices and increased borrowing costs has led to a slowdown in demand.
To support homebuyers, the US government offers various programs and benefits.
The Federal Housing Administration (FHA) provides mortgage insurance on loans made by FHA-approved lenders, which can help lower the barrier to homeownership for first-time buyers and those with lower credit scores.
Additionally, the Department of Veterans Affairs (VA) offers home loan benefits to veterans, active-duty service members, and eligible surviving spouses, often with no down payment required.
These programs aim to make homeownership more accessible, especially in challenging economic times.
Conclusion
The current slump in US home sales highlights the challenges faced by prospective buyers amid rising mortgage rates and high home prices.
While government assistance programs can provide some relief, navigating the housing market remains a complex task.
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Prospective buyers should stay informed about market trends and explore all available resources to make the best decisions for their financial futures.
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