According to the National Association of Realtors, sales of previously owned homes dropped by 2.2% in July, reaching an annual rate of 4.07 million. This figure represents the number of homes that would be sold over a year if sales maintained the same pace as July. It’s worth noting that these numbers are seasonally adjusted.
The current sales activity marks the lowest level since the Great Recession in 2010, with only January 2023 recording a lower figure of 4 million home sales. Despite expectations from economists on Wall Street, who predicted total existing-home sales to reach 4.15 million in July, the actual numbers fell short.
A notable 16.6% decline in home sales compared to July 2022 reflects the impact of higher mortgage rates and a persistent shortage of available homes for purchase.
Rising Home Prices
The median price for an existing home in July reached $406,700, representing a 1.9% increase compared to the previous year. However, home prices reached their peak in June 2022, as the median price for a resale home climbed to $413,800.
Of particular concern is the fact that approximately 35% of properties are being sold above the list price, as highlighted by the NAR.
Limited Housing Inventory
The total number of homes for sale in July experienced a significant drop of 14.6% compared to last year, resulting in only 1.11 million units available in the market. This decrease is particularly severe for single-family homes, with housing inventory reaching its lowest level since the early 1980s.
In conclusion, the combination of high mortgage rates and a scarcity of homes for sale has negatively impacted home sales in July. Despite the current challenges, the median price for existing homes continues to rise, and the housing inventory remains insufficient to meet demand in the market.
Real Estate Market Update
The real estate market is experiencing some notable shifts in recent months. Homes listed for sale are staying on the market for longer periods, with an average of 20 days, compared to 18 days in July. In the same period last year, homes were typically sold within just 14 days.
Across the country, sales of existing homes have only shown growth in the West, with a modest increase of 2.7%. The median price of a resale home in this region has reached $610,500.
Cash buyers continue to play a significant role in the market, accounting for 26% of all home sales. Individual investors or second-home buyers make up 16% of sales, while first-time home buyers represent 30% of the market.
The National Association of Realtors (NAR) projects that home sales will reach a total of 4.38 million in 2023.
Impact on Home Buying
Despite these figures, there are concerns about the impact of current market conditions on home buying. With the 30-year mortgage rate hovering at around 7.5% in August, buyers are becoming more hesitant, which could further suppress demand for purchasing homes. Unless rates begin to fall in the near future, the situation may worsen.
Even home builders, who typically have a different set of challenges compared to real estate agents working with homeowners, are expressing worries about rising interest rates and a potential decrease in buyer traffic.
Perspectives from Realtors
According to Lawrence Yun, chief economist at the National Association of Realtors, inventory availability and mortgage rates are the two driving factors affecting current sales activity. Unfortunately, both factors have been unfavorable to buyers.
In response to these trends, stock markets have shown mixed results in early trading on Tuesday. The yield on the 10-year note has risen above 4.3%.