Friday, December 9, 2022 / by Juan Grimaldo
Home sales have plunged. Buyers, facing the fastest-rising mortgage rates in decades, are scrapping their plans. And forecasters have rarely disagreed so much over where the market goes next.
By many measures, the housing market entered a sharp slump this summer after the Federal Reserve abruptly ended a real-estate boom fueled by the pandemic and record-low borrowing rates.
Mortgage rates climbed above 7% to 20-year highs in October and November before ticking lower in recent weeks. Existing-home sales have dropped for nine straight months through October, the longest streak since the National Association of Realtors began tracking this data in 1999.
It is typical for rising interest rates to cool the housing market. But the speed of this year’s mortgage-rate increase has created a sense of whiplash among buyers and sellers, and that makes it difficult to predict how long the housing slump will last and how bad it will get.
Contradictory signals abound. Demand has tumbled, but the supply of homes is still low. Prices have fallen but are well above their pre-pandemic levels. Interest rates are sky-high compared with a year ago, but below where they stood in the decades when many older Americans bought their first homes.
“When prices are rising, people can’t believe housing will ever go down, and then once prices fall, they can’t believe it will ever go up,” said Glenn Kelman, chief executive at real-estate brokerage Redfin Corp.
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By Nicole Friedman and Nick Timaraos, WSJ pro, Central Banking