Sellers struggle with denial: at the “right price” a house will sell, but the “right” is where the buyers are, and they are much lower.
By Wolf Richter for WOLF STREET.
Sales of all types of previously owned homes – houses, condos and co-ops – fell 5.9% in October from September, the ninth straight month of declines, to a seasonally adjusted annual sales rate of 4.43 million of houses, just a hair above the confinement-month of April 2020, according to the National Association of Realtors. Compared to the recent peak of free money in October 2020, sales are down 34%.
Year-over-year sales fell 28%, the 15th consecutive month of year-over-year declines. Beyond April and May 2020, this is the lowest sales rate since December 2011 (historical data via Y-Charts):
Sales of single-family homes plunged 6.4% in October from September, and 28% year-over-year, to a seasonally-adjusted annual rate of 3.95 million homes.
Sales of condos and cooperatives fell 2.0% in October from September, and 30% year-on-year, to 480,000 at a seasonally adjusted annual rate.
Investors or buyers of second homes bought 16% of homes in October, down from the 17% to 22% range in the spring and winter. In other words, their purchases have plunged at an even greater rate than the purchases of regular buyers, as investors too are losing interest in buying at these prices.
This drop in sales is a sign that sellers and potential buyers are at an impasse. Many potential sellers refuse to accept reality and lower their prices where the sellers are; instead they think, “and that too will pass”, and they hope or pray for a pivot from the Fed or for a miracle or whatever and don’t even put their house on the market, or take it down out of the market after getting no traffic at their aspirational asking price. And buyers have lost interest in current prices.
Houses that are priced right – that is, houses that are priced low where the buyers are – sell. But vendors don’t like to go there. And we also see it in the active lists. But there are price cuts afoot, as more and more sellers understand this.
Price reductions: In October, the number of homes listed with price reductions rose to 327,184 homes, the highest since October 2019, and just slightly below (data via real estate agent.com).
But the proportion of active listings with price reductions has exceeded 40% in the past five months, by far the highest in data made available by realtor.com, which dates back to 2016:
The median price of all types of homes whose sales closed in October fell for the fourth consecutive month and are now down 8.4% from the peak in June.
This further reduced the year-over-year gain, to 6.6%, from 8.0% in September and from year-over-year gains of 20% to 25% at the height of the frenzy last year, indicating that seasonality is solely responsible for part of the price drop, and the rest of the price drop is the fact that some sellers are becoming more realistic (historical data via YCharts):
Active announcements (total inventory for sale minus properties awaiting sale) rose to 754,000 homes in October, up 33% from a year ago, and the highest since August 2020. They remain relatively low, a another sign that potential sellers are still hoping for a The Fed pivots or a miracle and isn’t putting their vacant home on the market or pulling it off the market after a short while (data via real estate agent.com).
The days supply of total inventory rose to 3.3 months of sales, the highest since June 2020.
Sales by region: Sales plunged in all regions, but plunged the most in the West:
- Northeast: -6.6% mom; -23.0% YoY.
- Midwest: -5.3% mom; -25.5% over one year.
- South: -4.8% mom; -27.2% YoY.
- West: -9.1% mom; -37.5% YoY.
While mortgage rates jumped within the normal range of the pre-money printing era:
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