July existing-home sales fall for the sixth straight month, realtors see ‘housing recession’

This is the weakest level of sales since May 2020 at the end of the recession caused by the pandemic. Excluding the recession, the level of sales activity was lowest since November 2015.

Compared with July 2021, home sales were down 20.2%.

Key details: Prices moderated in July. The median price for an existing home fell to $403,800, up 10.8% from July 2021. That was the slowest annual pace of increase since July 2020.

The number of homes on the market rose 4.8% to 1.31 million units in July. 

Expressed in terms of the months-supply metric, there was a 3.3-month supply of homes for sale in July, up from 3 months in June. Before the pandemic, a four-month supply was more the norm.

It is still a tight market. Homes remained on the market only for 14 days on average. Pre-pandemic, the average time for homes to remain on the market was a month. 

Sales declined across all regions of the country. The West saw a “dramatic decline” in sales from a year ago of 30%.

All-cash transactions made up 24% of all transactions, down slightly from June. About 29% of homes were sold to first-time home buyers, down slightly from 30% in the prior month.

Big picture:  The decline in home sales comes as mortgage rates have doubled and recession fears spook buyers. 

Perhaps a silver lining is the pendulum is slowly swinging to the prospective home buyer’s side.

Sellers are upping incentives to entice apprehensive buyers, worried about a looming recession. 

To be clear, homes are still expensive. Borrowing costs are elevated, with the average contract rate for a 30-year fixed-rate mortgage at 5.45%, according to the Mortgage Bankers Association. And even though Yun said last month that he expects price appreciation to slow to 5% by the end of the year, prices are still out of reach for many first-time buyers.

Builders are calling the current situation a “housing recession,” and new construction of homes has started to fall. Builders expressed gloominess in an August survey, signaling that construction will continue to slow. Both will likely put pressure on the pipeline of new homes hitting the market in the future.

What the realtors said: In the month of June, “affordability has plunged to the lowest level in 30 years,” Lawrence Yun, chief economist at the NAR, said during a call.

“We are in a housing recession,” Yun said, only “in terms of sales and housing starts.” homeowners are still in a really “comfortable” position as home price growth continues. 

He added that he believes it is “possible that mortgage rates have already peaked” which would provide some relief for prospective buyers.

Market reaction: Stocks
DJIA,
-0.05%
and
SPX,
+0.24%
were down in early trading on Wednesday. The yield on the 10-year note
TMUBMUSD10Y,
2.879%
fell to 2.85%.