23 Jan COTW: Existing Home Sales – Now vs GFC
- Existing home sales have fallen by 2.6 million over the past 23 months, compared to a 2.4. million decline over the same period during the Global Financial Crisis. During the Global Financial Crisis, the housing market was flooded with an oversupply of homes as mortgage defaults rose. At the peak, there was an 11-month supply of inventory, as demand rapidly dried up. While inventories have started to tick up, they remain historically low at just 2.9 months of supply.
- The most recent data show that in 2022, U.S. existing home sales fell to the lowest levels since 2014. December home sales fell 34% year-over-year, marking the 11th consecutive monthly decline and the longest on record, going back to 1999.
- The Federal Reserve’s efforts to bring inflation back under control has reigned in the current housing market, as fixed mortgage rates climbed to a two-decade high of 7.1% in October 2022. However, while the decade-high interest rates are likely to lead to muted demand, it is unlikely to have the same impact on delinquencies, as adjustable-rate mortgages now account for less than 10% of mortgages compared to >30% during GFC peak.
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