A poster is posted in front of a house for sale on July 14, 2022 in San Francisco, California.
Justin Sullivan | Getty Images
Home sales of property prior to June fell 5.4% from May, according to a monthly report from the National Association of Realtors, as prices set records and rates rose.
The sales count declined at a seasonally adjusted annualized rate of 5.12 million units last month, the group said. Sales were 14.2% lower than in June 2021.
This is the slowest pace of sales since the same month in 2020, when sales fell very briefly at the start of the pandemic. Other than that, it is the slowest pace since January 2019, and below the 2019 annual total, before the pandemic.
These figures are based on home foreclosures, so contracts were likely signed in April and May, before the average 30-year fixed-rate mortgage rate exceeded 6% and as inflation rose towards rates that had not been seen since the early 1980s.
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“It’s clearly due to the drop in affordability,” said Lawrence Yun, chief economist at Realtors. “We’ve never seen mortgage rates rise so fast to this magnitude. Even people who want to buy have a price off.”
There were 1.26 million homes for sale at the end of June. This represents an increase of 2.4% over the previous June and the first year-on-year increase in three years. With the current pace of sales, inventory now stands at a three-month supply. This is still considered low, but improving. Supply is rising both because more sellers are trying to take advantage of perhaps the latest pandemic-induced housing boom, and because homes are now on the market for longer.
The still tight supply, however, keeps the heat below house prices. The average price of an existing home sold in June set another record at $ 416,000, a 13.4% year-over-year increase.
Activity continues to be stronger at the upper end of the market, where there is more supply. Home sales priced between $ 100,000 and $ 250,000, for example, were 31% lower annually, while home sales priced between $ 750,000 and $ 1 million increased 6% . Home sales with a price in excess of $ 1 million increased by 2%. The upper end seems to be weakening, as annual comparisons in recent months were much higher.
Even though sales are falling, the market is still incredibly fast. The average time a house spent on the market was 14 days, a record low.
“That’s an amazing figure, considering the slower sales,” Yun said. “People are trying to take advantage of their interest rate lockout. That may explain why days in the market are so fast.”
Sales are likely to fall more sharply in the coming months, as the latest indicators point to much weaker buyer demand. Mortgage applications fell to a 22-year low last week, with demand from home buyers 19% less than the same week a year ago, according to the Association of Mortgage Bankers.
“Based on trends at this stage of the business cycle and housing, I expect affordability to be the bigger engine than availability in the future,” said Danielle Hale, chief economist at Realtor.com. “We’re already seeing affordable Northeast and Midwest affordable areas top Realtor.com’s most popular housing markets in June, as home buyers continue to take advantage of workplace flexibility to look for ways to reduce housing costs “.