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What factors are contributing to the discrepancy between declining sales of existing homes and increasing sales of new homes in the current real estate market?
The current real estate market is being influenced by the Federal Reserve's efforts to raise interest rates to combat 40-year high inflation, leading to increased mortgage rates and decreased demand for existing homes.
Mortgage rates have more than doubled since 2022, resulting in increased monthly payments for new homeowners, making it more challenging to afford existing homes.
In contrast, new home sales have risen by 8.8% in the previous month, indicating that buyers are opting for new constructions as an alternative to the historically low supply of existing homes for sale.
The rising mortgage rates and record-high prices are causing a budget-busting mix, leading to a decline in sales of existing homes.
New home sales have become an appealing option for buyers, as construction of single-family homes has increased, with a seasonally adjusted annual rate of 1,022 million in March.
The median selling price has increased by 48% from a year ago to $393,500, the highest for any March on record, further supporting the shift towards new home sales.
In March, pending home sales climbed by 3.4%, indicating a slight recovery, but the sales of existing homes continued to decline, with a nearly 30-year low.
The Souther California homebuying market has slowed to its second-slowest March in Southern California since 1988 due to the budget-busting mix of rising mortgage rates and record-high prices.
The sales of existing homes have been declining since 2022, with the exception of a slight increase in 2023, indicating a stabilizing trend in the market.
The supply of existing homes has been low, causing buyers to opt for new constructions, which has resulted in an increase in new home sales.
Economic indicators, such as forecasted home sales rates, have indicated a decline in home sales, with economists predicting a rate of 430 million units.
Despite the decline in existing home sales, new home sales have continued to rise, driven by falling mortgage rates and an increase in construction.
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