Housing market sees sharpest drop in sales in nearly two decades: report

Housing market sees sharpest drop in sales in nearly two decades: report

Samantha DeBianchi, founder of DeBianchi Real Estate, recommends clipping mortgage rates as the 30-year fixed rate is above 5%.

New data suggests the housing market is experiencing its sharpest decline in nearly two decades as home sales hit their lowest level in seven years.

Existing home sales data showed a 5.9% decline from June to July and a 20.2% drop from the same period a year earlier, marking the sixth straight month of decline. The median price of a home rose 10.8% year over year to $403,800, but is still $10,000 down from the previous month’s peak, according to the National Association of Realtors.

These declines came even as the inventory of unsold homes rose to 1.31 million by the end of July.

“The continued decline in sales reflects the impact of the 6% peak in mortgage rates in early June,” said NAR chief economist Lawrence Yun. “Home sales may soon stabilize as mortgage rates have fallen to almost 5%, giving homebuyers an additional boost in purchasing power.”

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“We are currently experiencing a real estate recession in terms of declining home sales and housing construction,” Yun added. “However, this is not a recession in home prices. Inventories remain tight and prices continue to rise nationwide, with nearly 40% of homes still fetching full list price.”

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The rise in mortgage rates has helped cool the once sizzling real estate market quickly, pushing average house prices to record highs. The Federal Reserve hiked interest rates to curb rampant inflation.

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The six-month decline marks perhaps the fastest drop since 2005, according to Seeking Alpha.

The average seasonally adjusted rate of home sales over the past decade was about 5.35 million, but the current level is about 4.81 million, compared to 6.50 million in half a year. Only the first year of the pandemic shows a sharper drop in home sales.

home mortgage

A For Sale sign is posted in front of a property in Monterey Park, California on August 16, 2022. – The US housing market is declining on higher interest rates with fewer housing starts and more abandoned deals. (Photo by FREDERIC J. BROWN/AFP via Getty Images/Getty Images)

The previous non-pandemic rate, which achieved a similar cliff jump, occurred in 2005 after the housing bubble peaked. The ensuing decline occurred over nine months from 2006 to 2007 and led to the housing crisis of 2008.

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And the Conference Board reported a 0% annual rate of change in its Leading Economic Index. Seeking Alpha found that since 1960 it would be the 13th time interest rates have gone negative since 1960, and 66% of those earlier falls preceded a recession.

Megan Henney of FOX Business contributed to this report