By Jordan Yadav | Bloomberg
Sales of previously owned U.S. homes fell for a seventh consecutive month in August as rising mortgage rates continued to erode affordability and dealt a major blow to the housing market.
The rate of contract closings fell 0.4 percent to an annual pace of 4.8 million, the weakest since May 2020, data from the National Association of Realtors showed on Wednesday. A Bloomberg survey of economists called for an average estimate of 4.7 million. Sales fell 17.4 percent on an unadjusted basis from a year ago.
The decline was the longest since the housing market crashed in 2007. While weak demand has dampened industry sentiment, economists foresee a relatively modest pullback in home prices amid still tight supply in most areas.
The average rate on a 30-year fixed mortgage rose to 6.25 percent last week, the highest in nearly 14 years and more than double the rate from a year ago, according to the Mortgage Bankers Association.
Rising borrowing costs come as Treasury yields rise as a result of tighter Federal Reserve monetary policy aimed at reining in decades of high inflation. The central bank on Wednesday announced a three-quarter percentage point rate hike, the third consecutive hike.
“Inventories will remain tight in the coming months and even the next few years,” NAR Chief Economist Lawrence Yoon said in a statement. “Some homeowners are unwilling to trade up or trade down after closing in on historically low mortgage rates in recent years, increasing the need for more new home construction to increase supply.”
The number of homes for sale fell 1.5 percent from July to 1.28 million. At the current sales pace it will take 3.2 months to sell all homes on the market, up from 2.6 months in August 2021. Realtors see less than five months of supply as an indication of a tight market.
Despite declining sales, “we’re not seeing any increase in inventory on net,” Yoon said.
The median sales price rose 7.7 percent from a year ago to $389,500. The annual increase was the smallest since June 2020. After hitting a record high of $413,800 in June, prices have fallen on a monthly basis. August’s decline was broad across price points and regions.
“In a sense, we’re seeing a return to normalcy with the home buying process as it relates to home inspection and appraisal emergencies,” NAR President Leslie Rhoda Smith said in a statement. The planting wars have essentially stopped.”
First-time buyers accounted for 29% of all transactions in August, matching July’s share.
Cash sales are 24 percent of total sales. Investors, who typically buy with cash and are therefore less sensitive to mortgage rates, make up 16% of the market. This is up 14% from a month ago.
-Sales in the Midwest fell 3.3 percent, while purchases increased in the West and Northeast. They were unchanged in the South.
-Properties stayed on the market for an average of 16 days, up from 14 days in July.
August transactions fell at all price points, in contrast to recent months in which the most expensive homes were still selling.
81% of homes sold in August were on the market for less than a month.
– Existing condominium and co-op sales are up 4% from a month ago. Sales of single-family homes fell 0.9 percent
-Existing home sales account for about 90% of US housing and are calculated when a deal closes. New home sales, which make up the remainder, are subject to contract signatures and will be released next week.
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