Sales of existing homes fell for the sixth consecutive month in July, as growing concerns about affordability sideline potential home buyers – and prices are finally starting to fall from record highs amid the cooling of demand, as experts predict the next few months could be critical for the housing market.
Sales of existing homes fell 5.9% from June to a seasonally adjusted annual rate of 4.8 million in July, from more than 6 million a year ago after widespread declines in the United States. United, according to the data published Thursday by the National Association of Realtors.
In a statement, NAR chief economist Lawrence Yun said the continued decline in recent months reflects the impact of rising mortgage rates, which peaked at 6% in June and pushed the monthly payments on new mortgages cost hundreds of dollars on average. each month.
Amid falling demand, the median price of existing homes fell from a record high of $413,800 in June to $403,800 last month, snapping a five-month streak of gains and hitting the highest level ever. low since April.
“We are seeing a housing recession in terms of declining home sales and construction; however, this is not a house price recession,” Yun said, noting that prices are still up by nearly 11% from a year ago and increased year-on-year. base for 125 consecutive months, the longest streak on record.
NAR predicts that the median existing home price could drop more than 5% to $380,000 by the end of this year, but that’s still about 5% higher than a year ago.
In comments emailed after the report, Pantheon Macro’s chief economist Ian Shepherdson said prices “would have to come down much further” before the housing market reached a new equilibrium, noting that it would take 3.1 months to sell the current supply of existing homes (based on the current pace of sales) compared to just 1.7 months in January.
Home sales “could stabilize soon” as mortgage rates have since fallen to around 5.4%, Yun adds, saying the respite should give “an additional boost to homebuyers’ purchasing power” even if the rates are still around 2 percentage points higher at one year. from.
What we don’t know
Experts are increasingly concerned that the housing market crash could help trigger a recession as the Federal Reserve raises interest rates. Last month, the Bureau of Labor Statistics reported that the economy had unexpectedly contracted for a second straight quarter and blamed the worse-than-expected data in part on a decline in residential investment (or home buying). houses). “The turmoil in the housing market alone will not change the policy trajectory of the Fed, but for those on the [Federal Open Market Committee] who fear overdoing the pace of tightening, it will set off alarm bells,” says Shepherdson.
Since housing costs have been a big component of soaring inflation this year, Comerica Bank chief economist Bill Adams said “a much cooler housing market” will help drive down core inflation next year.
Historically high savings and low interest rates have led to record growth in sales and home prices during the pandemic, but this year has seen a sharp turnaround after the Fed began raising interest rates in March . On Tuesday, Fitch Ratings released a note warning that the likelihood of a severe U.S. housing downturn has risen as homes have become increasingly unaffordable for most Americans. The firm predicts only a “moderate decline” in the housing market, but it also acknowledged that real estate activity could fall by around 30% or more over a period of several years in the worst case.
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