A sign is displayed in front of a home for sale on July 14, 2022 in Corte Madera, California.
Justin Sullivan | Getty Images
Used home sales fell nearly 6% in July from June, according to a monthly report from the National Association of Realtors.
The number of sales fell at a seasonally adjusted annual rate of 4.81 million units, the group added. This is the slowest selling pace since November 2015, except for a brief dip at the start of the Covid pandemic.
Sales fell about 20% from the same month a year ago.
“In terms of economic impact, we are surely in a real estate recession because builders are not building,” said Lawrence Yun, chief economist for real estate agents. “However, are the owners in a recession? Absolutely not. The owners are still very well off financially.”
July sales figures are based on closings, so contracts were likely signed in May and June. Mortgage rates soared in June, with the average 30-year fixed loan rate exceeding 6%, according to Mortgage News Daily. It then returned to the upper 5% range. This rate started this year around 3%, so the hit to affordability in June was hard, especially with soaring inflation.
Homebuyers are also still struggling with a tight supply. There were 1.31 million homes for sale at the end of July, unchanged from July 2021. At the current rate of sales, that represents 3.3 months of supply.
As demand declines due to lower affordability, prices remain stubbornly high. The median price of a home sold in July was $403,800, a 10.8% year-over-year increase. However, the price gains are now moderating as this is the smallest annual increase since July 2020.
“The median price of home sales continued to climb, but at a slower pace for the fifth consecutive month, highlighting how lower demand from buyers is bringing the housing market back to a more active pace. normal,” said Danielle Hale, chief economist. on Realtor.com. “A review of active inventory trends shows real estate listings were almost twice as likely to have suffered a price decline in July 2022 compared to a year ago.”
Sales activity continues to be stronger at the high end of the market, although this too is fading rapidly. There is simply more supply available on higher levels. Sales of homes priced between $100,000 and $250,000 were down 31% from a year earlier, while sales of homes priced between $750,000 and $1 million dollars were down 8%. Sales of homes priced over $1 million are down 13% from a year ago.
First-time buyers represented only 29% of buyers in July. Historically, they typically make up around 40% of sales, but they clearly struggle the most to be affordable. High rents also prevent them from saving for a down payment.
Even though sales are slowing, it’s still a fast-moving market. A typical house in July was contracted in just 14 days, matching the fastest on record in June. A year ago it was 17 days. Yun called it “unusual.”