US existing home sales fell again in July for the sixth straight month, prompting one industry economist to call a “housing recession” although prices remain near record highs.
Higher mortgage rates and inflation have all weakened homebuyer demand and led to declining sales, but tight inventories have kept home prices growing, albeit at a slower pace.
The National Association of Realtors said Thursday home sales for the last month from June fell 5.9 percent to a seasonally adjusted annualized rate of 4.81 million — a 20.2 percent decline from a year earlier.
Home prices remain solidly high, with the nationwide median selling price in July of $403,800 representing a 10.8 percent year-over-year increase, albeit a slight decline from the record set a month earlier.
“We’re having a housing recession in terms of declining home sales and housing construction, but it’s not a recession in home prices,” said NAR chief economist Lawrence Yun.
“Inventory remains tight and prices continue to rise across the country, with nearly 40 percent of homes still asking full list price,” Yun added.
Although home transactions fell, prices remain solidly strong, with the nationwide average selling price in July of $403,800 representing a 10.8 percent increase from a year earlier
The National Association of Realtors said Thursday that home sales for the last month from June fell 5.9 percent to a seasonally adjusted annualized rate of 4.81 million
Home prices remain solidly high, with the nationwide median selling price in July of $403,800, up 10.8% year-on-year and just below June’s record high
Home sales have now fallen to their slowest pace since May 2020, just before the start of the pandemic that brought the US housing market to a virtual standstill.
As the Federal Reserve has raised interest rates to combat inflation, it has simultaneously pushed up mortgage rates, raised costs for homebuyers, and made their monthly home payments more expensive.
“The continued decline in sales reflects the impact of the 6 percent peak in mortgage rates in early June,” Yun said.
‘Home sales may soon stabilize as mortgage rates have fallen to almost 5%, further boosting the purchasing power of homebuyers.’
The average interest rate on a 30-year fixed-rate mortgage this week was 5.13 percent, mortgage buyer Freddie Mac reported Thursday. That’s down from recent highs, but well above a year ago when it averaged 2.86.
The last time there was a six-month losing streak in home sales was between August 2013 and January 2014.
The average interest rate on a 30-year fixed-rate mortgage this week was 5.13 percent
People walk past a home for sale in Los Angeles, California on Tuesday
Still, home prices are showing little sign of slowing down. Prices rose in all regions, and July marked 125 consecutive months of year-on-year increases, the longest streak on record.
The average July price in the Northeast was $444,000, an 8.1 percent increase from a year earlier.
The median price in the South rose 14.7 percent year-over-year to $365,200, while the Midwest saw a 7 percent increase to $293,300.
The West had the highest median home price of $614,900, up 8.1 percent from July 2021.
Home sales fell the most in the west, falling 9.4 percent month-on-month and 30 percent year-on-year.
“It’s likely that some western markets will see a price drop, and that will be welcome news for buyers who have seen rapid price jumps over the past two years,” Yun said.
The July sales report is the latest evidence that the housing market, a key driver of economic growth, is slowing from recent blistering growth as homebuyers grapple with significantly higher mortgage rates.
Annual home price growth has slowed from its most recent late-breaking rate, which was nearly 20% a year ago
Home seekers had a wider choice of properties to choose from in July as the number of homes for sale rose 4.8 percent from June to 1.31 million homes. That was unchanged from July last year.
But real estate is moving fast, with the average home selling just 14 days after the market hit last month, a record pace from June.
Before the pandemic, homes were typically listed for more than 30 days before they were sold.
At the current sales pace, the number of properties for sale stands at 3.3 months supply, indicating a growing stock.
Inventory was only 2.9 months in June and 2.6 months in July 2021, but supply for about 5.6 months reflects a balanced market between buyers and sellers.
Last week, the NAR announced that its home affordability index — a metric that uses median existing home prices, median family incomes and average mortgage rates to calculate home affordability — fell to 98.5 percent in June lowest level since 1989.
The National Association of Realtors found that its housing affordability index — a metric that uses median existing home prices, median family incomes and average mortgage rates to calculate home affordability — fell to 98.5 last June, its lowest level since 33 years
With the average mortgage payment hitting $1,944 in June, Americans are struggling to make ends meet. The NAR says anything over 25 percent of household income goes toward mortgage payments means homes aren’t affordable
The new report followed data this week that showed that single-family housing starts, which account for the largest share of housing construction, fell to a two-year low in July.
The National Association of Home Builders/Wells Fargo Housing Market sentiment index also fell below breakeven in August for the first time since May 2020.
The Fed is struggling to bring inflation back to the Federal Reserve’s 2 percent target and has hiked its benchmark interest rate by 225 basis points since March, when it was near zero.
Minutes from the July Fed meeting, released Wednesday, showed policymakers acknowledging that higher borrowing costs had dampened demand for housing.
The minutes show that Fed officials “expected this slowdown in housing activity to continue.”