Nationwide, many would-be homebuyers have been waiting on the sidelines for mortgage rates to come down before committing to purchasing. At one point last year, rates were at historically low levels of 2% and 3% only to rise to the current level of around 7% — prompting many to wait for a reduction.
Are US home sales declining?
“People are a little scared to make this commitment,” Sykes said. “The interest is there; they just feel in order to really write a contract and go into a contract they need to feel like they’re getting a deal. There’s a lot of fear of potentially overpaying and, of course, the affordability is further down than it was at this time last year, even though if you look historically, we’re at about average 30-year mortgage rates.”
In its most recent report, the National Association of Home Builders found that home sales across the board remained flat but signaled that improvement could be seen later this year. The group blames higher mortgage rates and home prices – as well as increased construction costs – as factors leading to the sales slowdown.
Sales of newly built, single-family homes in February increased 1.1% to a 640,000 seasonally adjusted annual rate from a downwardly revised reading in January, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau, the NAHB reported. However, the group noted that new home sales are down 19% compared to a year ago.
“Builders continue to face challenges in terms of higher interest rates, elevated construction costs and access to critical materials like electrical transformers,” Alicia Huey, chairman of the National Association of Home Builders (NAHB) and a custom home builder and developer from Birmingham, Ala., said in a prepared statement. “Nonetheless, the lack of existing home inventory means demand for new homes will rise as interest rates decline over the coming quarters.”