Homebuyers Retreat Amid War Fears
The United States’ housing market has become a frozen market since buyers are afraid of purchasing homes owing to the increasing number of fears resulting from the Iran situation as well as other issues. The total housing sales in the month of March were reduced to 3.98 million, representing a decline of 3.6 percent in the total annual housing sales, the lowest in nine months, because of the poor spring buying period.
From what it seems, uncertainty is common amongst real estate agents, who have noted that most people are afraid of purchasing property until there is stability within the economy.
“Buyers feel like they are frozen in ice and they don’t know where to go,” remarked a Texas real estate agent.
Consequently, the market is frozen and not crashed until there are clear signs from the economy.
Rising Mortgage Rates Add Pressure
Some of the contributing factors that have caused the decline in the economy include the increase in mortgage rates, which has increased to more than 6.3%, compared to 6% in previous years.
The increase in the rate of mortgages was caused by the war between the United States and Iran, which led to an increase in oil prices, which in turn increased the rate of inflation.
Increases in interest rates made property purchase difficult for the average consumer, therefore making it impossible for the new entrants in the market to buy homes.
“As interest rates become the gatekeeper of the mortgage market, when interest rates rise too quickly, demand will slow immediately.”
Confidence Shaken by Global Uncertainty
Apart from considering the issues associated with funding, there is also the issue of economic uncertainty that has contributed to lowering the demand for homes. Uncertainty surrounding the economic condition of the Middle East has affected markets, and consequently increased the cost of fuels while also lowering consumer confidence, which is important for buying houses.
Potential buyers of homes are now considering the stability of their job positions, rate of inflation, and overall economy when it comes to buying a house. “At present, the uncertainty factors are simply too much,” as per a real estate professional. “They prefer first to see where things stand before investing in such purchases.”
Courtesy Of Adi Purwanto ( Flickr CC0)Sellers Also Step Back
In addition to the pullback by the consumers, there is also a large number of sellers who are sitting on the sidelines, adding to the sluggish performance of the housing sector. Property owners who benefitted from cheap financing during the pandemic period do not want to sell their homes because they would have to face higher interest expenses when applying for another mortgage.
The “lock-in effect” is still at play, limiting the supply of units regardless of the lack of demand.
Furthermore, the process of selling a house has been extended, and sellers are slowly beginning to be open to negotiation.
Prices Hold Firm Despite Slowdown
Despite lackluster sales, house prices have been resilient to pressure. House prices have grown by 1.4% annually in March because of the scarcity of supply within the market.
It is becoming harder for buyers to buy homes because of increasing prices and interest rates.
“It’s tough out there,” according to an expert in the industry. “With declining sales, prices haven’t come down enough to lure buyers.”
Outlook
According to the view of economists, the existing pattern of low growth rate in the real estate sector must go on for some more time. Although it is anticipated that interest rates will fall at the close of the year, many things will depend on political and economic circumstances.
At present, the real estate market seems to be in a limbo situation, where expensive properties, uncertainty regarding international affairs, and cautious purchasers bring the market to a grinding halt.
“Real Estate Market is not collapsing,” an economist said. “Certainly it is frozen but could continue to stay frozen till uncertainties get resolved.”
By William Hernandez
Journalist for Vlixx Magazine, reporting on news from around the world, ensuring timely, accurate, and detailed information to keep the public informed and educated.
Sources:
bbc: US home buyers ‘frozen’ as sales slump over Iran war fears
reuters: US existing home sales hit nine-month low in March, rising mortgage rates cloud outlook
Featured and Inset Image Courtesy of Adi Purwanto Flickr Page – Creative Commons License
Inset Image Courtesy of Colin Flickr Page- Creative Commons License
