By Zachary Halaschak, Economics Reporter. Media: Washingtonexaminer
Sales of existing homes declined in July, down 16.6% from the year before.
Existing home sales fell by 2.2% from June to July to a seasonally adjusted rate of 4.07 million, according to a report by the National Association of Realtors released Tuesday.
Total housing inventory at the end of July was 1.11 million units, up 3.7% from June and down 14.6% from a year ago.
The median price of an existing home in July was $406,700, an increase of 1.9% from the year before. Additionally, homes typically remained on the market for 20 days in July, up from 18 days in June and 14 days in July 2022.
The news comes as mortgage rates rise to levels not seen in more than two decades, with the Federal Reserve most recently increasing its interest rate target to a range of 5.25% to 5.50%.
“Two factors are driving current sales activity – inventory availability and mortgage rates,” said NAR chief economist Lawrence Yun. “Unfortunately, both have been unfavorable to buyers.”
As the Fed raises rates, mortgages have soared.
As of Monday, the average rate on a 30-year fixed-rate mortgage has soared to 7.48%, according to Mortgage News Daily. That marks a nearly 0.5 percentage point increase in just the past month alone. The last time rates were this high was November 2000.
During the height of the pandemic, when the housing market became red hot, homebuyers were able to lock in ultra-low mortgages of less than 3%.
Because mortgage rates have surged so much, owners of existing homes who have mortgages with rates locked in before 2022 are shying away from selling because they want to keep their historically low rates. That means less existing home inventory on the market, making new homes more of a hot commodity.
The dynamic between existing home sales and new home sales has complicated the housing market a bit. That is because while some economists declared the housing market to be in a recession last year, the number of people holding on to their existing homes has put pressure on new home sales.
The number of housing starts, which measures the change in the number of new residential buildings that began construction, ticked up in July despite rising mortgage rates.
Starts rose 3.9% from June to this past month, according to a Wednesday report from the Census Bureau. They are at a seasonally adjusted annual rate of 1.452 million. From July 2022, they rose 5.9%.
Although new home sales data have been mixed from month to month, with some reports showing declines and others showing increases in sales, given the pressure for more inventory, builders have kept constructing. That is good for the broader economic health of the country because it translates to more jobs and spending that ripple through the economy.
Discussion about this post