The housing market in the U.S. is showing signs of a slowdown, with house prices falling for the first time in nearly a decade. According to the Bank of England, mortgage approvals fell for the fifth consecutive month in January to their lowest level in more than two years, while the ASB Housing Confidence Survey for the three months to January showed a net 43 percent of respondents expected house prices to decrease in the coming year.
An evaluation by real estate company Redfin this week showed that US homes sold for an average of $350,246 during the four weeks ending February 26. In comparison to the same month in the preceding year, the sale price dropped by 0.6%, the first annual decrease since February 2012.
Since Liz Truss's brief premiership, mortgage rates have decreased, yet not sufficiently to encourage purchasing interest. Higher borrowing costs have squeezed buyers, and the average value of a home was £257,406 ($310,380), 3.7% lower than the August 2022 peak. Despite the dropping prices, first-time homebuyers are unlikely to see much relief due to higher mortgage rates and shrinking real wages.
Robert Gardner, Nationwide's chief economist, stated in a Wednesday statement that it will be difficult for the market to regain a great deal of momentum. It is anticipated that headwinds will stay rather strong, since the job market is likely to deteriorate as the economy contracts in the coming quarters, and mortgage rates stay significantly higher than in 2021.
Rising wages together with weak or declining house prices could make houses more affordable, especially if mortgage rates edge lower in the coming months. However, the market could struggle to regain momentum in the near term since economic headwinds look set to remain relatively strong.
South Islanders outside of Canterbury are the most pessimistic about price expectations, with 47 percent of respondents expecting prices to decrease in the coming year, according to ASB's survey. Meanwhile, over three quarters (78%) of respondents expect higher interest rates over the coming year.
The bottom line: Home prices have been soaring for the past few years — putting homeownership out of reach for many Americans. Given the current high interest rates, it will take significant reductions in house prices in order to entice more first-time buyers into the market.
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