A sign in front of a house for sale on July 14, 2022 in San Francisco, California.
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Sales of previously owned homes in June fell 5.4% from May, according to a monthly report from the National Association of Realtors, as prices hit record highs and rates soared.
The group said the number of sales fell to a seasonally adjusted annual rate of 5.12 million units last month. Sales are down 14.2% compared to 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’s the slowest pace since January 2019, and lower than the annual total for 2019, pre-pandemic.
Those numbers are based on home closings, so contracts are likely to be signed in April and May, before the average 30-year fixed mortgage rate crosses 6% and inflation climbs toward rates not seen since the early 1980s.
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“Obviously this is due to lower affordability,” said Lawrence Yun, chief economist at real estate brokers. “We’ve never seen mortgage rates rise so quickly at this scale. Even people who want to buy, are priced in.”
There were 1.26 million homes for sale at the end of June. This represents a 2.4% increase from the previous June, and the first year-over-year gain in three years. At the current sales pace, inventory now stands at a three-month supply. This is still considered low, but it is getting better. Supply is increasing because more sellers are trying to take advantage of what may be the last of the sharp and pandemic-induced housing boom, and because homes are now on the market for much longer.
However, supply that remains scarce is keeping the heat under housing prices. The median price of an existing home sold in June hit another record high at $416,000, up 13.4% year over year.
Activity continues to be stronger at the higher end of the market, where there is more supply. Sales of homes between $100,000 and $250,000, for example, were 31% lower annually, while sales of homes between $750,000 and $1 million increased 6%. Sales of homes over $1 million are up 2%. The higher end appears to be weakening, as annual comparisons in recent months have been much higher.
While sales are declining, the market is still incredibly fast. The average time a home spent on the market was 14 days, a record low.
“That’s an astonishing number, given the slowdown in sales,” Yoon said. “People are trying to take advantage of their interest rate lock. That might explain why the days in the market are so fast.”
Sales are likely to decline more sharply in the coming months, as the latest indications point to significant weakness in buyer demand. Mortgage Applications It fell to its lowest level in 22 years Last week, demand from homebuyers was 19% lower than the same week a year ago, according to the Mortgage Bankers Association.
“Based on trends at this point in the housing and business cycle, I expect affordability to be the biggest driver going forward than availability,” said Danielle Hill, chief economist at Realtor.com. “Already, we see affordable areas of the Northeast and Midwest top Realtor.com’s hottest real estate markets in June, as home shoppers continue to take advantage of workplace flexibility to look for ways to reduce housing costs.”
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