Sales of owned homes fell by 3.4 percent last month according to the National Association of Realtors. According to a source, the rise of home price and shortage of home availability strained the housing markets. Home buyers may have also been affected by concerns about potentially increasing mortgage rates as the concerns over the rate hike by the Federal Reserve continue to persist. In fact, analysts expect that the Federal Reserve will raise rates during it meeting on November. As the target federal funds gets raised, the interest rates and mortgage rates would also increase.
Furthermore, according to the Chief Economist of the National Association of Realtors Lawrence Yun, there are still concerns about homes for sale shortage. He also said that if this shortage persists, an inventory crunch may occur during the next peak selling season.
Concerns Over First Time Home Buyers
On a related note, if a shortage of first time home buyers happens, this could furthermore create a slow down in home sales. And although first time home buyers increased by 2% over the last two months, the rising home prices and mortgage rates can push them back. First time buyers represent about 40% of pre owned home buyers, making them a very important part of the home sale statistics. But the good news is that there is a steady job growth, which can impact the decision of first time buyers.
Home prices made a 5.8% increase year after year to a $219,600 average. These home price hike impacted the lowering sales in the South and the West, but the home sales in the Northeast was held steady as that is where home price hike remains the slowest.
The sales of pre owned homes are expected to rise 3% next year, but rates and affordability will still continue to impact the actual sales and overall behaviour of the housing markets.
