Demand has been weak for several months but it got much weaker during October, driven down by the weight of continued large increases in mortgage interest rates. The count of listings under contract has been almost cut in half compared with this time last year, while closed sales are down more than 38%. The market is desperately short of buyers.
Things could be a lot worse however because the high-interest rates are almost as discouraging for sellers. Despite the abysmally low rate at which new contracts are being signed, active listing counts rose only 2.5% over the last month, due to the shortage of new sellers.
With the Federal Reserve still raising the Federal Funds Rate, the outlook for mortgage rates is biased to the upside. This means November is likely to be similar to October, only more so:
- Extremely weak demand
- Unusually low number of new listings
- Poor negotiation power for most sellers
- Very low contract signings
Conditions are very good for buyers who can still afford a home. They have little competition from other buyers and sellers will treat them with about 1,000 times more respect than they would have in 2021. Our problem is that “buyers who can still afford a home” are becoming an endangered species. Even existing homeowners are often unable to afford to move because this would mean giving up their current cheap mortgage and taking out a new very expensive one. It’s a pity that US mortgages are not portable like some are in a handful of foreign countries.