NEW YORK — In the residential neighborhoods of Bergen County in northern New Jersey on the 22nd, "For Sale" signs — which in a typical year would appear in a yard every few houses — were noticeably fewer. The reason is a sharp drop in the number of buyers touring homes since the second half of the year.
Bergen County sits across the Hudson River from Manhattan, the largest urban center in the United States, and serves as a bedroom community for the city. It has long drawn steady demand from families looking to live there, thanks to strong public schools, safe streets and convenient amenities. Home transactions in the area have contracted sharply as a surge in mortgage rates was compounded by the relocation of Samsung Electronics' U.S. corporate office.
Jay Lee, a local real estate agent, said demand from people moving into the area has stalled because of the burden of current rates, and that sellers are trimming prices. "People usually take out a 30-year mortgage when they buy a home, but now more are taking five- to seven-year loans in hopes of refinancing, betting that rates will come down," he said.
The slump in home sales is not confined to New Jersey but is playing out across the United States. The yield on the 30-year U.S. Treasury bond, the benchmark for mortgage rates, has climbed above levels seen during the global financial crisis, driving up the cost of buying a home. Homeowners who took out loans at low rates are putting off moves, while would-be buyers are giving up on new purchases. The average rate on a 30-year fixed mortgage stood at 7.40% as of the 15th, the highest in three years since November 2023, according to Freddie Mac, the government-backed mortgage financier. The rate eased to 7.32% on the 22nd, but remains far above the 5.98% recorded on Feb. 27, the day before the war with Iran began. On BiggerPockets, the largest U.S. real estate community forum, questions have been pouring in along the lines of whether it makes sense to buy a home at a rate above 7.4% when sellers far outnumber buyers.
A homebuilder working on the U.S. East Coast said conditions have deteriorated so much that discount competition has intensified in sales of newly built homes. Robert Dietz, chief economist at the National Association of Home Builders, said on the group's podcast that everything is tied to the war with Iran, and that a mortgage rate of 7.5% will unfortunately become the "new normal."
Mortgage applications fell 5.3% in the week of the 15th to the 21st from the previous week, according to the Mortgage Bankers Association. Applications to purchase a home dropped 7% over the same period and were down 18% from a year earlier. Refinancing applications fell 2% from the prior week and plunged 59% from a year earlier.
The National Association of Realtors' index of pending sales of existing homes for September tumbled 7.3% from August to 66, the lowest level since the series began in 2001. Contracts declined across the country, with the West posting the steepest drop at 9.2%. In the South, the largest market for home sales in the United States, the index fell 8.2%. Because sales contracts are typically signed one to two months before closing, the measure is viewed as a leading indicator of the housing market.
The NAHB's housing market index for October also fell 3 points from September to 29, the lowest reading since June 2012. In that survey, 43% of builders said they had cut asking prices because of weak demand, the highest share since 2020. The average price cut reached 6%. The share of builders offering sales incentives, such as help lowering mortgage rates, came to 65%. Privately owned housing starts in September totaled 1.221 million units, down 5.2% from August, the U.S. Commerce Department said.
Sellers outnumbered buyers by 62.6% nationwide in September, the widest gap since 2013, according to a report from the brokerage platform Redfin. In cities such as Miami, Nashville, Houston and Austin, the share of sellers exceeded that of buyers by 130% to 160%. The figures point to a market that favors buyers but remains stuck, because borrowing costs are too high for them to step in.
The housing downturn is emerging as a major variable not only for U.S. financial markets but also for the midterm elections on the 3rd of next month. Housing costs are seen as an issue with particular power to sway younger voters. CNBC noted that rising mortgage rates and broader inflation are weighing heavily on both prospective buyers and renters, and that monthly mortgage payments for someone buying a $450,000 home have risen by $300 since the start of the year.
Against that backdrop, President Donald Trump signed an executive order the same day aimed at lowering housing costs, including measures to reduce mortgage insurance premiums and expand the supply of manufactured homes. Mortgage insurance is typically required when a buyer borrows with a down payment of less than 20% of the purchase price.