"Interest Rates High and Prices Expensive"... US Home Sales Decline for 3 Consecutive Months

[Image source=AP Yonhap News]

[Asia Economy Reporter Kim Hyunjung] The U.S. housing market is cooling down due to rapidly rising mortgage rates and record-high prices.

According to the National Association of Realtors (NAR) on the 19th (local time), existing home sales in the U.S. in April decreased by 2.4% compared to the previous month, marking a decline for three consecutive months. Compared to the previous month, sales fell by 5.9%.

The Wall Street Journal (WSJ) diagnosed this as "a sign that the housing market boom, which began in mid-2020, is losing momentum." It added, "Record-low mortgage interest rates and increased demand for larger homes after COVID-19 triggered sales and drove prices up," noting that "hundreds of people lined up for some popular homes."

According to NAR, the median price of existing homes in April was $391,200 (approximately 500 million KRW), up 14.8% year-over-year. WSJ reported that this is the highest level since 1999. Lawrence Yun, NAR's chief economist, explained, "High home prices and the sharp rise in mortgage interest rates have reduced buyer activity," adding, "The market is returning to pre-pandemic levels."

As the Federal Reserve (Fed), the U.S. central bank, raised interest rates consecutively in response to inflation, the 30-year fixed mortgage rate soared from the 2.9% range at the beginning of the year to 5.3% last week. According to the seasonally adjusted index from the Mortgage Bankers Association (MBA), weekly mortgage applications for home purchases as of the 13th of this month decreased by 12% compared to the previous week and by 15% year-over-year.

As of the end of April, the inventory of homes available for sale reached 1.03 million units, up 10.8% from the previous month. However, April housing inventory was down 10.4% year-over-year. Coupled with supply chain issues, U.S. housing starts are also declining. According to the U.S. Department of Commerce, housing starts in April fell 0.2% compared to the previous month, and new housing permits decreased by 3.2%.