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Home sale volume hits record low mid-2023

Home sale volume hits record low mid-2023
by Brad Cartier, posted in Newsletter

Mortgage rates have exceeded the 7% point for the 30-year fixed-rate average to their highest levels in at least 21 years. Now, according to Logan Mohtashami of Housing Wire, they could get close to 8%. 

“Short-term, as long as the economy outperforms, 8% is in the works. However, you can see the limits of mortgage rates now because the Federal Reserve has told us they believe their policy stance is restrictive. They don’t want to push the lever too much because one of their goals is to keep the Fed funds rate higher for longer.”

Rates at 23 year highs

Source: FRED (August 2023)

Clare Trapasso of has a similar view: “Rates will likely go even higher, potentially as high as 8%, if the U.S. Federal Reserve continues to hike its short-term interest rates to push down inflation. Mortgage rates typically follow the same trajectory of the Fed’s rates. So if inflation is stickier than the Fed wants to see, it could raise its rates, causing mortgage rates to go up.”

Orphe Divounguy of Zillow comments on this new reality, highlighting that stronger-than-expected economic data and the Treasury’s plans to increase the size of its bond auctions led to the short-term rise in interest rates. A strong economy means people are still spending and putting upward pressure on inflation. 

Rob Wile of NBC News reports that the average 30-year rate hit 7.48% as of Monday, a 23-year high. This is due to a strong economy and less interest in government bonds. Less demand drives up bond yields, which are tied to mortgage rates which increase in concert.

WeWork troubles

Emily Fu of ConnectCRE reports on the embattled co-working giant WeWork, which recently announced a 40-1 stock split to keep in compliance with the NYSE. The reverse stock split will combine 40 existing shares into one share as of September 1st.

The Visual Capitalist highlights the rise and fall of WeWork, noting that by January 2019 the company was valued at $47 billion. Now, the company has a market capitalization of about half a billion.

Last week, the company reportedly said “substantial doubt exists” that it could stay afloat, according to Andria Cheng of CoStar. To help solve the financial problems facing WeWork, the company plans to shed more space after exiting or amending 590 leases since the Q4 of 2019. The company has also already cut $12.7 billion in future lease payments. 

Ari Levy of CNBC reports that WeWork had a net loss in Q1 of $700 million after losing a total of $2.3 billion in 2022. By the end of June 2023, WeWork had $205 million in cash and total liquidity of $680 million but still had almost $3 billion in long-term debt.

WeWork’s financial troubles point to the larger concern with commercial real estate, according to Edward Helmore of The Guardian. U.S. office vacancy rates now hover over 13%, and “adding WeWork-leased properties to the vacancy list would only compound commercial real estate’s distress, at a time when many are wondering whether we need to fundamentally rethink the use of office buildings in the post-Covid, work-from-home era.”

For more, check out Erik Sherman’s Globe St article, WeWork and the Challenge of Labeling CRE Companies as Tech.

Sales volume

As a result of surging mortgage rates, sales volume has hit record lows as would-be buyers and sellers stay on the sidelines. According to Sabrina Speianu of, new listings dropped again last week and are down 8.1% year-over-year. Active listings also decreased for the 8th consecutive week, lagging last year by 8.6%.

“While it’s likely that we might see more new listings this fall than the previous year, inventory will continue to remain constrained as listings are still more than 20% below typical pre-pandemic levels seen this time of year.”

Indeed, Glenn Kelman, CEO of Redfin, is quoted by Inman as saying that the housing market is now at “rock bottom.” Kelman continues by saying that “[s]ales volume couldn’t be worse…The only people moving right now are the ones who absolutely have to.” Further, younger generations still on the sidelines waiting for their chance to purchase a home will keep housing prices propped up for the foreseeable future.

Dana Anderson of Redfin highlights that the lack of resale activity has boosted new home construction purchases. Newly built homes now comprise a third (31%) of single-family homes on the market as of Q2 2023. According to Anderson, that is a record share and is keeping the broader market afloat as we see minimal existing homes coming to market.

New home construction sales high

Source: Redfin (August 2023)

“For many homebuyers, new construction is a welcome option in today’s market–especially in the southern part of the country, where new homes tend to be more prevalent. That’s partly because new homes are often easier to find and partly because builders are more likely than individual homeowners to offer concessions; builders typically don’t have the option of pulling a home off the market if they’re unable to get the price they want.”

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