US Real Estate Market Activity Plummets to 2008 Lows

Real estate activity in the United States has declined to levels not seen since the global financial crisis of 2008. A recent report from TD Economics highlights that, despite a slight uptick in home resales in July, the overall market remains sluggish, continuing a downward trend that began following interest rate hikes over three years ago.

In July 2023, existing home sales in the U.S. rose by 2 percent compared to June, with notable growth in multi-family home sales, which increased by 2.8 percent. The Northeast region of the country experienced the strongest activity. However, this improvement was insufficient to reverse the market’s prolonged slump. The report indicated that sales activity is still “hovering near its lows” from 2008, a troubling sign for the housing market.

Inventory levels also saw a modest increase, climbing nearly 1 percent month-over-month and approximately 16 percent year-over-year. The overall supply in the U.S. market stood at 4.3 months in July. For comparison, Calgary’s resale market was notably tighter at 3.3 months, according to statistics from the Calgary Real Estate Board.

The report noted that the U.S. housing market continues to face “sluggish demand” alongside slight improvements in inventory. These factors have contributed to weak price growth across many areas. Notably, the softness in the market is concentrated primarily in the southern and western regions of the country, indicating a geographical disparity in housing activity.

One of the primary challenges affecting the real estate market is the level of mortgage interest rates. The average fixed-rate mortgage for a 30-year term has recently decreased by 20 basis points to 6.6 percent in mid-July. This decline may have provided some relief, enabling a modest increase in resale activity for that month.

Nevertheless, for a more significant recovery in the resale market, the U.S. Federal Reserve would need to consider additional cuts to its overnight interest rate in the coming months, as suggested by the TD report. The path ahead for the U.S. real estate market remains uncertain, with ongoing challenges likely to test its resilience in the near future.