Sellers cling to 2021 prices, freezing the market as sales slump and prices rise. It’s about to get uglier.

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Sellers are holding onto 2021 prices, refusing to budge even as the real estate market shows alarming signs of strain. In September, existing home sales dropped by 3.0% to 4.02 million—one of the lowest levels on record, just above the onset of the 2020 pandemic. Despite this slump in activity, the median home price rose by 3.9%, reaching $428,212, nearly matching its all-time high. This tug-of-war between stagnant sales and unyielding prices has left the housing market frozen, with many buyers priced out by rising mortgage rates and inflated costs.

This reluctance to lower prices, combined with high household debt and surging mortgage rates, has created a significant standoff. Contracts for home closings are down a sharp 30% from pre-pandemic levels. The continued price hikes in the face of these declines underscore a grim reality: the housing market is grinding to a halt.

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U.S. household debt has also seen troubling trends, rising as a share of disposable income despite recent data showing a slight decline. With household debt payments accounting for around 9.8% of disposable income, according to Apollo, the financial burden on households remains heavy. Rising debt and stagnant wages have compounded the problem, leaving fewer buyers in the market able to afford these persistently high prices.

The overall impact is clear: buyers face a housing market where few can afford to enter, and sellers cling to peak pricing from years past, setting up an unsustainable cycle. With sellers refusing to adjust prices to match demand, experts warn the market’s correction is likely to get worse before it stabilizes.

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