Existing U.S. home sales fell to a six-month low in July as homeowners locked in low-cost mortgages refrained from selling their properties, driving inventory down.
Despite falling sales volume, that limited inventory helped drive prices up year-over-year for the first time since January, with the median home price hitting $406,700.
Existing home sales fell 2.2 percent in July from the previous month to a seasonally adjusted annual rate of 4.07 million, the National Association of Realtors said Tuesday.
Residential resale, which accounts for a large portion of U.S. home sales, fell 16.6 percent from July last year. It was also the lowest level of home sales for the month of July since 2010.
The annual decline in sales was steepest in markets in the Northeast and Midwest, where sales fell by 20 percent or more, though all regions experienced annual sales declines, the NAR said.
Home prices rose in July in the Midwest, Northeast and South compared to a year ago, and remained flat in the West
Existing home sales fell 2.2 percent in July from the previous month to a seasonally adjusted annual rate of 4.07 million, the National Association of Realtors said Tuesday.
Sales fell in the Northeast, Midwest and South, but rose in the West, where home prices fell most sharply in the past year. All regions experienced an annual decline in sales volume.
Home prices have bottomed out after being squeezed by the Federal Reserve’s aggressive rate hikes, but the continued shortage of real estate for sale could limit any upturn as many potential buyers are driven out of the market.
Mortgage rates recently rose again to their highest level in decades, with the average rate on the popular 30-year, fixed-rate mortgage rising above 7 percent last week, according to mortgage financing giant Freddie Mac.
Last month there were 1.11 million previously owned homes on the market, up 3.7 percent from a month earlier but down 14.6 percent from July 2022.
At the July sales rate, it would take 3.3 months to exhaust the current stock of existing homes, compared to 3.2 months a year ago.
A supply of four to seven months is seen as a healthy balance between supply and demand. The average existing home price rose 1.9 percent from a year earlier to $406,700 in July, the fourth time it has surpassed $400,000.
“Two factors are driving current sales activity: inventory availability and mortgage interest rates,” said Lawrence Yun, NAR chief economist. “Unfortunately, both have been unfavorable to buyers.”
The shortage of existing homes on the market has boosted construction and sales of new homes in recent months.
The NAR predicted that total resale sales in 2023 will fall by 12.9 percent compared to 2022, while total new home sales will increase by 12.3 percent in 2023.
Despite falling sales volume, that limited inventory helped drive prices up year-over-year for the first time since January, with the median home price hitting $406,700.
House prices have been falling year-on-year since January, but the trend reversed in July
Homebuyers face the highest mortgage rates since 2002 as experts warn higher lending will bring the real estate market to an abrupt halt
The Department of Commerce will report new home sales data for July on Wednesday. Economists polled by Reuters see a modest increase in the number of transactions.
Sales of new homes have outperformed sales of existing homes so far this year.
Property typically remained on the market for 20 days in July, compared to 14 days a year ago. Seventy-four percent of homes sold in July were on the market for less than a month.
New buyers accounted for 30 percent of sales, up from 29 percent a year ago.
Sales fell the least for homes priced above $1 million, as supply was less constrained relative to demand than for lower value homes, Yun said.
Cash sales accounted for 26 percent of transactions, compared to 24 percent a year ago. Distressed sales, including bankruptcies, accounted for 1 percent of transactions, essentially unchanged from June and the previous year.
Yun said it’s “everyone’s guess” about when mortgage rates will begin to ease, and some economists don’t expect much relief until 2024.
“Predicting short-term mortgage rates is very difficult, but we expect mortgage rates to begin to normalize next year,” said Matthew Walsh, an economist at Moody’s who focuses on the housing market.
That could encourage some homeowners to resell and look for more new homes, he said, but it may take a while for current interest rates to compete with the mortgages the majority of existing homeowners took out before interest rates hit. rose.
“We expect the lock-in effect to continue for quite some time,” Walsh said.