US Housing Market Overview

The surge in home prices in the US in 2021 can be attributed to a combination of factors, including the increased housing demand as owning a house became a priority post pandemic; a shortage of construction manpower leading to supply crunch; and favourable mortgage rates back then in 2021. However, the pandemic triggered uncontrolled inflation and in response to that the US Federal Reserve initiated a series of interest rate hikes, resulting in higher mortgage rates. As of the early months of 2023, new home sales have been on a decline, falling below market expectations through August 2023. This downward trend was also seen in the existing home sales in the country as homeowners who locked in low interest rates stayed put and were hesitant to list homes. Builders' sentiment began to erode in August, as the costs of mortgages, construction materials, and labor wages continued to rise. Mortgage rates are expected to remain above 6% for the rest of 2023, keeping sales volume low. Recent data indicates competition easing faster than normal in the US housing market on the loosening of inventory and home prices ticking down in Sep’23 as sellers slightly lowered their asking price. The US home buying activity is expected to be largely driven by the rising employment in high paying sectors and expectations that the Fed will start lowering interest rates in 2024.