With home prices and interest rates both on the rise, will more people look to renting as their only “affordable” option for housing? It looks like that might already be happening.
Newly released data from the National Association of Realtors shows that existing home sales fell to a three-year low in September, as home prices rose for the 79th straight month. That’s more than six years of monthly price gains, and it’s putting a squeeze on housing affordability.
Another headwind for single-family housing is that interest rates are basically at the highest level they’ve been at in 10 years.
Combine steadily rising home prices with recent record-high interest rates and now people can’t afford as much house as they could just a few months ago.
And that could push people to look for an alternative: renting.
“For a while, inventory was the main scapegoat for sales volumes that failed to launch, under the theory that it’s hard to buy meaningfully more homes when there are significantly fewer homes actually available for sale,” Zillow Senior Economist Aaron Terrazas noted about Friday’s existing home sale report.
“But that argument is harder and harder to sustain with every passing month, with nationwide inventory declines slowing dramatically and the number of homes for sale actually on the rise in many large markets,” Terrazas continued.
Instead, Terrazas said that the “recent sluggishness” in home sales seems to be driven by decreasing demand driven by rising interest rates and rents that are finally moderating (or perhaps even slowing down).
And that could keep people renting for the foreseeable future as renting appears…