Buyers who wait on the sidelines to buy a home are waiting for two things to happen: a reduction in mortgage interest rates and a reduction in the value of the home.
While federal funds rate hikes by the Federal Reserve will determine where interest rates go, the expected decline in the value of homes largely depends on their owners.
According to Kieran Clancysenior US economist at Pantheon Macroeconomics, the rate of decline in home values could accelerate if previously reticent sellers begin flooding the market with additional inventories in an effort to stave off further price declines.
Read also: Will there be a housing market crash in 2023?
Clancy pointed out that although home sales and builds have changed significantly to reflect plummeting demand, home prices still have a long way to go.
If you’re an aspiring sideline home buyer, you can generate passive income on rental properties while you wait. Here’s how to invest as little as $100 and get paid on a quarterly basis.
Home prices have recently begun to decline on a monthly basis due to a lack of supply, Clancy said in a statement, ‘but inventory is already creeping up as many previously reluctant sellers begin to worry that their home will get a much lower price if they keep waiting to sell.”
In October, the number of homes sold in the United States fell for the ninth consecutive month as buyers withdrew from the market amid rising mortgage rates and high prices.
Existing home sales were down in October from a year earlier and were down 5.9% from September, according to a survey by the National Association of Realtors.
There were decreases in every region of the US both month over month and year over year.
This was the longest period of declining sales on record, dating back to 1999, and continues a trend that began to slow in February.
October sales fell to their lowest level since May 2020, during the pandemic lockdowns, when the housing market was at a standstill. Other than that, last month’s sales were the lowest since December 2011.
Read also: The Fed is crushing the housing market, not inflation
“That trickle of supply could quickly turn into a flood, however, increasing the speed — if not the maximum depth — of home price declines,” Clancy said. “We think prices need to fall about 20% from their spring peaks to reach a sustainable level.”
To read the latest developments in the industry, check out Benzinga’s real estate home page.
Don’t miss real-time alerts on your actions – join Benzinga Pro for free! Try the tool that will help you invest smarter, faster and better.
© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.