A sign is posted in front of a home for sale July 14, 2022 in Corte Madera, California.
Justin Sullivan | Getty Images
July home sales were down almost 6% compared to June, according to a monthly report from the National Association of Realtors.
Sales declined to a seasonally adjusted annualized rate of 4.81 million units, the group added. It’s the slowest pace of sales since November 2015, barring a brief dip early in the Covid pandemic.
Sales fell by around 20% compared to the same month last year.
“In terms of the economic impact, we’re certainly in a real estate recession because builders aren’t building,” said Lawrence Yun, chief economist at Realtors. “But are homeowners in a recession? Absolutely not. Homeowners are still very comfortable financially.”
The July sales numbers are based on deals, so the deals were probably signed in May and June. According to Mortgage News Daily, mortgage rates rose in June, with the average rate on the 30-year term loan topping 6%. After that, it leveled off again in the high 5% range. That rate started this year at around 3%, so affordability was hit hard in June, especially when combined with rising inflation.
Homebuyers are also still struggling with a tight supply. At the end of July, 1.31 million homes were for sale, unchanged from July 2021. At the current pace of sales, this equates to 3.3 months of supply.
While demand falls due to weaker affordability, prices remain stubbornly high. The median price of a home sold in July was $403,800, up 10.8% year-on-year. However, gains are now moderating as this marks the smallest annual gain since July 2020.
“The median home selling price continued to rise, but at a slower pace for the fifth straight month, shedding light on how downward buyer demand is moving the housing market back to a more normal pace of activity,” said Danielle Hale, chief economist at Makler.com. “Looking at trends in active inventories shows that the likelihood of a home listing price drop in July 2022 is almost double what it was a year ago.”
At the top end of the market, selling activity continues to be stronger, although that too is fading quickly. There is simply more supply available at the higher levels. Sales of homes priced between $100,000 and $250,000 were down 31% year over year, while sales of homes priced between $750,000 and $1 million were down 8%. Sales of homes priced over $1 million fell 13% year over year.
First-time buyers made up just 29% of buyers in July. Historically, they typically accounted for about 40% of sales, but they clearly struggle the most with affordability. High rents also make it difficult for them to save for a down payment.
Even if sales are slow, this is still a fast-moving market. A typical house in July was signed in just 14 days, the fastest value ever recorded in June. A year ago it was 17 days. Yun called it “unusual”.