Home / Business and Economy / 7% Mortgage Rate Shakes US Housing Market
7% Mortgage Rate Shakes US Housing Market
25 Sep
Summary
- Existing home sales remain at extremely low levels for four years.
- New home sales hit an eight-month high, boosted by builder rate buy-downs.
- Builder permits and starts for new homes are at multi-year lows.
The current mortgage rate of 7% is causing a significant slowdown in the existing U.S. home sales market, which has seen extremely low activity for four consecutive years. In contrast, new home sales experienced an eight-month high in August. This surge in new home sales is attributed to builders' ability to buy down mortgage rates, a strategy not available to the existing home market.
Despite the positive figures for new home sales, the overall health of housing construction is concerning. Builder permits and starts have fallen to multi-year lows. If builders' corporate profits decline, their capacity to offer rate buy-downs may diminish, potentially impacting new home sales. The affordability crisis is most acutely felt in the existing home sales sector.
