US Housing Market Sees Record Low Demand Amid Rising Mortgage Rates
Key Summary
US home sellers outnumbered buyers by a record 57.9% in August, with 7% mortgage rates pushing buyers out. The decline in demand reflects stretched household budgets rather than cheaper homes, with 20% of US families late on a loan or mortgage payment and serious delinquencies climbing. This marks a stark reversal from early 2022, when buyers outnumbered sellers by around 35%. The trend is expected to continue, with the New York Fed's third-quarter household debt report due in early November, which will show whether delinquencies are still climbing.
Causes of the Decline in Demand
The US housing market is experiencing a record low in demand, with sellers outnumbering buyers by a margin of 57.9% in August. This is largely due to the impact of rising mortgage rates, which have pushed buyers out of the market. The average 30-year fixed mortgage rate reached 7.28% on Oct. 1, its highest level since November 2023. This has led to a decrease in the number of buyers, with Redfin estimates that there were roughly 972,300 active buyers in August, the lowest count in data going back to 2013.Impact on Household Budgets
The decline in demand reflects stretched household budgets rather than cheaper homes. According to the Federal Reserve, 20% of US families were late on a loan or mortgage payment within the past year. This is a significant increase from 2022, when only 12% of families were behind on payments. Serious delinquencies also climbed, with about 8% of families falling 60 or more days behind. Debt burdens are heavier, too, with 8.6% of families now spending over 40% of income on debt payments.
Consequences for Mortgage Lenders
The trend is also having a significant impact on mortgage lenders. United Wholesale Mortgage (UWM), the largest US mortgage lender, closed at a record low of $1.08 on Oct. 9. The stock has dropped roughly 82% from its January high of $6.15. UWM reported a $451.9 million second-quarter loss, driven by a $603 million hedging hit. The company is on track for its 9th consecutive red month, its longest losing streak in history. The decline in demand and rising delinquencies point to a market where stress compounds, making it challenging for mortgage lenders to operate. The New York Fed's third-quarter household debt report, due in early November, will show whether delinquencies are still climbing.