Woes just keep on mounting for the housing market, which is getting hammered by elevated mortgage rates and home prices.
Existing-home sales dropped 5.9% in July from June, marking the sixth straight monthly decline, according to the National Association of Realtors (NAR).
That put the annual sales rate at 4.81 million, the lowest since May 2020, early in the covid pandemic. Sales were down 20.2% in July from a year earlier.
“The ongoing sales decline reflects the impact of the mortgage rate peak of 6% in early June,” NAR Chief Economist Lawrence Yun said in a statement.
The 30-year fixed-rate mortgage topped out at 5.81% in the week ended June 23, according to Freddie Mac. It averaged 5.13% in the week through Aug. 18, up from 2.86% a year ago.
Demand Seen ‘Continuing to Drag’“Inflation appears to be beyond its peak, which has stopped the rapid increase in mortgage rates that the housing market was experiencing earlier this year,” Sam Khater, Freddie Mac’s chief economist, said in a statement.
Still, “the market continues to absorb the cumulative impact of the large price and rate increases that led to a plunge in affordability,” he said.
“As a result, over the rest of the year, purchase demand likely will continue to drag, supply will modestly increase, and home price growth will decelerate.”
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In terms of pricing, the median existing-home sales price totaled $403,800, up 10.8% from a year earlier, according to the NAR. This marks 125 consecutive months of year-over-year increases, a record streak.
To be sure, the price is down from $416,000 in June, and the July year-on-year increase decelerated from 13.4% in June.
Housing Recession”We’re witnessing a housing recession in terms of declining home sales and home building,” Yun said. Earlier this week, National Association of Home Builders Chief Economist Robert Dietz also said we’re suffering a “housing recession.”
As for building, housing starts dropped 9.6% in July from June to an annual rate of 1,446,000, according to the government. That’s down 8.1% from July 2021 and represents the lowest level since February 2021.
“However, it’s not a recession in home prices,” Yun said. “Inventory remains tight, and prices continue to rise nationally, with nearly 40% of homes still commanding the full list price.”
To be sure, he sees potential for improvement in the market. “Home sales may soon stabilize since mortgage rates have fallen to near 5%, thereby giving an additional boost of purchasing power to home buyers.”
But it doesn’t look like that will happen quickly. Mortgage applications dropped a seasonally-adjusted 2.3% in the week ended Aug. 12 from a week earlier, according to the Mortgage Bankers Association (MBA). That put the number of applications at its lowest level since 2000.
“Home purchase applications continued to be held down by rapidly drying up demand, as high mortgage rates, challenging affordability, and a gloomier outlook of the economy kept buyers on the sidelines,” MBA economist Joel Kan said in a statement.