U.S. Economy Sees Decrease in Home Sales
The U.S. housing market is seeing a decrease in home sales as affordability is dropping for millions of Americans. In October, the National Association of Realtors reported that sales of existing homes fell in September for the first time in three months. According to experts, higher prices and mortgage rates have lessened demand for real estate.
Purchases dropped 1.9 percent to a 5.29 million annual rate from a revised 5.39 million pace in August. Additionally, the association added that affordability is now at a five-year low as the median price for a house increased by 11.7 percent in the past year.
U.S. house prices rose 0.3 percent in August from July. More homeowners also listed their properties for sale, according to the Federal Housing Finance Agency (FHFA). This could be a troubling trend for millions of citizens since many cash-strapped individuals are liquidating their home assets given the high unemployment rate in the United States. There are nearly 50 million individuals receiving food stamp benefits.
Industry insiders believe that borrowing costs will continue to climb in 2014, which means more Americans won’t be able to afford purchasing a home. In a Bloomberg survey, 67 economists called for the pace of annual home purchases to slow to 5.3 million. Some estimate that the rate would be as low as 5.1 million and as high as 5.5 million.
Rising prices, stagnant incomes, and high unemployment are making it more difficult for consumers to purchase property. The housing affordability index fell to 156.1 in August from 160.7 the prior month. It’s the lowest figure since November 2008.
Such trends are expected to lower demand for industries connected to the housing market such as construction services, related supplies, and home service providers.
For instance, business directory site Fixr has published a cost guide for various home contractor services, including the costs associated with home remodeling. Significant remodeling on a household can cost upwards of a few thousand dollars after factoring in materials and services. Thus, such providers could see lower demand in the near future given recent trends in the housing market, as well as, projected higher borrowing costs in 2014.
According to Fixr, carpenters can charge $70 per hour; electricians between $65 to $85 per hour; painters between $20 and $35 per hour; and plumbers between $45 and $65 per hour.
The median price of an existing home increased to $199,200 from $178,300 in September 2012. The average rate on 30-year home loans reached 4.58 percent in late August, a two-year high, according to Freddie Mac. Sales of properties priced $500,000 or more are up 40 percent.
