According to Yahoo News, Redfin CEO Glenn Kelman believes that the US housing market can't get much worse from its current state. High mortgage rates and soaring prices have significantly impacted affordability for potential buyers, resulting in a market freeze and a prolonged sales slowdown.
Kelman attributes the current market conditions to high mortgage rates, which have increased borrowing costs for homebuyers and discouraged potential sellers from listing their properties. This has further intensified the supply shortage and driven up home prices, even as demand decreases due to higher rates. The median sales price for a single-family home reached $420,846 in August, while mortgage rates have remained above 7%.
Existing home sales have dropped to a seasonally adjusted rate of around 4 million a year, down from approximately 6.6 million a year in late 2020, according to the National Association of Realtors. The limited number of homes entering the market are primarily from homeowners selling out of necessity, such as due to marriage or job changes, rather than foreclosure risk as seen in previous housing slowdowns.
Kelman predicts that the sales slowdown will persist for a long time, as affordability is unlikely to improve until mortgage rates decrease. However, this is not expected to happen within the next year, as central bankers maintain a hawkish stance on inflation. Fed officials have raised interest rates aggressively over the past 18 months to combat high prices, contributing to the current two-decade high mortgage rates. Markets are pricing in a 44% chance that interest rates will remain higher than 5% by the end of 2024, while Redfin anticipates the 30-year mortgage rate to drop to around 6% by the end of 2023.
