The real estate market of the United States is starting to open, but there will be problems on the way back – RT World News

(CNN) -– It’s been another rollercoaster year for the US real estate market.

High mortgage interest rates and high home prices left home buyers in a difficult position. In addition, homeowners have been reluctant to put their properties up for sale and risk losing the ultra-low mortgage interest rates they received during the pandemic. .

Big changes are coming to the way you buy and sell a home in the US: what’s in it

That created the perfect storm for a largely frozen housing market, but the prospect that the Federal Reserve will soon start cutting interest rates is breathing new life into it.

The 30-year fixed mortgage began falling earlier this year and recently fell to its lowest level in more than a year, according to data from mortgage finance giant Freddie Mac. homeowners rush to refinance their mortgages.

In addition, another encouraging news came this Friday: new home sales rose more than 10% last month, reaching the highest level since May 2023, as reported by the Bureau of ‘ Census and Department of Housing and Urban Development.

In addition, existing home sales rose last month, although at a much smaller pace of 1.3%, according to data from the National Association of Realtors. That broke a four-month streak of lower sales.

But for many people who want to finally own a home, the housing market looks as bleak as it did when the Federal Reserve was still raising rates last year.

Access problems still exist

Home prices rose 4.2% in July compared to a year earlier, after rising for the 13th consecutive month, the NAR reported Thursday. To qualify for the existing median-priced single-family home, a prospective buyer must have a household income of about $110,000, according to recently released housing affordability data by a real estate trade association. Three years ago, families had to earn about $59,000 to qualify for the same type of housing.

Big changes are coming to the way you buy and sell a home in the US: what’s in it

What’s worse is that “affordability conditions are unlikely to improve significantly,” Wells Fargo economists said in a note this week. This is because housing supply is still not keeping up with strong demand, they said. Add to this the cooling of the labor market and the growth of wages, “this may limit the potential for a full recovery of the real estate market.”

There is no miracle solution for the real estate market

Lower mortgage rates should relieve some of the pressure on the housing market, but it could be a while before they fall enough to provide significant relief. The question now is not whether the Fed will reduce borrowing costs (as Fed Chairman Jerome Powell just gave his strongest signal yet about the first level of cut to come), but how to measure and how quickly it will be done. It is not clear whether the standard mortgage rate will fall below 6% this year.

The Fed does not set mortgage interest rates directly, but its actions influence them through the US Treasury’s 10-year benchmark yield. Bond yields typically fell on developments that prompt the Fed to cut interest rates, such as a rise in unemployment or continued moderation in inflation. And they rose on signs that the Fed might keep rates unchanged, such as persistent inflation.

That means more data or speeches from central banks recommending lower interest rates in the future are needed to move mortgage rates. The average mortgage rate has been largely stable since declining earlier this month.

“The market had already largely anticipated the themes of Chairman Powell’s speech and I don’t expect mortgage rates to move much in response to that as investors had priced in as -already in a path of rate cuts,” said Mike Fratantoni, chief economist and senior vice president. president of business research and technology at the Mortgage Bankers Association, in a note this past Friday. “Our forecast still shows mortgage rates falling to around 6% over the next 12 months or so.”

How the recent deal between real estate agents could change how Americans buy and sell homes

Even if mortgage rates fall below 6%, Americans will still have to pay for the most expensive homes in history. A definite reason for housing prices is the housing supply, which is not even close to meeting demand. But there were positive steps in the right direction: Total housing inventory at the end of July was 1.33 million units, according to NAR data. That is 0.8% more than in June and 19.8% more than a year ago. Home inventory has improved every month this year so far.

The continued shortage of housing on the market is the main challenge to the American housing market because of its effect on prices. The two main candidates for the presidency of the United States – Vice President Kamala Harris and former President Donald Trump – proposed their own solutions to strengthen the housing supply. Trump has proposed using federal land to address the housing shortage, and Harris has called for the construction of 3 million new housing units.

Experts have previously told CNN that there really isn’t a magic solution to America’s unaffordable housing market, and that a solution could take time and a lot of effort from all stakeholders.

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