Rapidly rising mortgage rates sunk home sales and listings to new depths in September.
The number of homes sold last month plummeted 25 percent year over year while new listings dropped 22 percent, according to Redfin. Those are the largest declines reported by the brokerage since figures seen early in the early months of the pandemic.
“The U.S. housing market is at another standstill, but the driving forces are completely different from those that triggered the standstill at the start of the pandemic,” Redfin research lead Chen Zhao said in a statement.
Unlike the record drops in May and April 2020, when the onset of the pandemic cratered the national housing market, inflation has kept prices high and deterred potential sellers from putting their homes on the market and sacrificing their current rates.
Roughly 60,000 home-purchase agreements — or 17 percent of homes that went under contract — were canceled in September. That’s the second highest percentage on record following March 2020.
The median sale price was down just 0.5 percent month-over-month in September, but is up 8 percent year over year to $403,797.
Zhao expects the Federal Reserve to continue hiking interest rates with inflation still on the rise. As a result, mortgage rates — which she called “the primary killer of housing demand” — may not decline until early to mid-2023.
“The housing market is going to get worse before it gets better,” Zhao said.
Mortgage rates were at 3 percent a year ago, but have since shot up toward the 7 percent mark. After reaching a 15-year high in recent weeks, National Association of Realtors chief economist Lawrence Yun predicted rates could surpass the benchmark to rise as high as 8.5 percent in the near future.