The summer of 2023 has brought the real-estate sector to a screeching halt, with mortgage rates hovering around 7% and home listings becoming scarce. According to Glenn Kelman, CEO of Redfin, the housing market can only be described as "rock bottom." Sales volume has plummeted, and only those who absolutely need to move are doing so. In June, sales of previously owned homes dropped by 3.3% to an annual rate of 4.16 million, a worrying trend that is expected to continue in July. The combination of high interest rates, steady home prices, and a lack of affordability is making it increasingly difficult for prospective homebuyers to catch a break.
The rising cost of owning a home is causing a generational shift, with younger generations finding it increasingly challenging to enter the housing market. In the past, people would move to areas with cheaper options when seeking independence, but now apartments and houses alike are expensive. This shift is leading to a decline in household formation and a deferral of the American dream of homeownership. Baby boomers, who came of home-buying age in 1991, owned considerably more real estate in their 30s than those in their 30s in 2023. The transfer of wealth that typically occurs when individuals achieve homeownership has been hindered by soaring home prices and tight credit.
Housing Market Comes to a Halt in Summer 2023
The real estate sector is experiencing a significant slowdown in 2023, with mortgage rates hovering around 7%. This has made it more expensive for aspiring homeowners to buy a home. Additionally, the number of home listings has decreased as homeowners are holding out on selling their properties. The housing market this summer can only be described as "rock bottom," according to Glenn Kelman, CEO of Redfin, a real estate brokerage.
Sales volume has hit a new low, with only those who absolutely need to move making any transactions. In June, sales of previously owned homes fell by 3.3% to an annual rate of 4.16 million, according to the National Association of Realtors. The situation is expected to persist in July as well. Kelman explains that even though some buyers are finding good deals, they are purchasing homes at high interest rates. Home prices, on the other hand, have remained relatively steady, adding to the affordability challenge.
The rising cost of owning a home is causing a generational shift. In the past, people seeking independence would move to areas with cheaper housing options. However, the trend has reversed, with both apartments and houses becoming expensive. This is leading to a decline in household formation, as it becomes increasingly difficult for younger generations to afford homeownership. Kelman describes it as an "arrested-development problem."
Baby boomers who came of home-buying age in 1991 owned considerably more real estate in their 30s compared to people in their 30s in 2023. This shift in wealth has left younger generations unable to buy homes, with home prices being out of reach. As a result, society may witness a deferral of the American dream of homeownership, as renters remain in their current situations longer to accumulate enough wealth to purchase a home. The transfer of wealth that typically occurs when people achieve the American dream has been hindered by the expensive housing market and tight credit.
In conclusion, the housing market in the summer of 2023 has come to a halt, with mortgage rates at 7% and a scarcity of home listings. Sales volume has plummeted, and those who do purchase homes are facing high interest rates. The rising cost of homeownership is causing a generational shift, with younger generations finding it increasingly difficult to afford homes. This could lead to a delay in achieving the American dream of homeownership, as wealth transfer has been limited due to high home prices and tight credit.