National Association of Realtors (NAR) chief economist, Lawrence Yun, was quoted This Week in Real Estate that “we’re witnessing a housing recession in terms of declining home sales and home building, however, it’s not a recession in home prices.” The median existing-home sales price in July was up 10.8% from the previous year marking 125 consecutive months of year-over-year increases. That represents the longest running streak on record. For the second consecutive month the average days on market was 14, the fewest since NAR began tracking this data point in May 2011. Below are a few newsworthy events from the third week of August that influence our business:
Existing-Home Sales Retreated 5.9% in July. Total existing-home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, slipped 5.9% from June to a seasonally adjusted annual rate of 4.81 million in July. Year-over-year, sales fell 20.2% (6.03 million in July 2021). “The ongoing sales decline reflects the impact of the mortgage rate peak of 6% in early June,” said NAR Chief Economist Lawrence Yun. “Home sales may soon stabilize since mortgage rates have fallen to near 5%, thereby giving an additional boost of purchasing power to home buyers.” Total housing inventory registered at the end of July was 1,310,000 units, an increase of 4.8% from June and unchanged from the previous year. Unsold inventory sits at a 3.3-month supply at the current sales pace, up from 2.9 months in June and 2.6 months in July 2021. The median existing-home price for all housing types in July was $403,800, up 10.8% from July 2021 ($364,600), as prices increased in all regions. This marks 125 consecutive months of year-over-year increases, the longest-running streak on record. “We’re witnessing a housing recession in terms of declining home sales and home building,” Yun added. “However, it’s not a recession in home prices. Inventory remains tight and prices continue to rise nationally with nearly 40% of homes still commanding the full list price.” Properties typically remained on the market for 14 days in July, the same as in June and down from 17 days in July 2021. The 14 days on market are the fewest since NAR began tracking it in May 2011. Eighty-two percent of homes sold in July 2022 were on the market for less than a month.
Mortgage Rates Settle in The 5% Range. Mortgage rates appear to be settling in the 5% range after recent dramatic climbs that shocked home buyers. The 30-year fixed-rate mortgage averaged 5.13% this week, down slightly from its 5.22% average a week ago, Freddie Mac reports. Mortgage rates peaked at 6% in early June, which prompted a pullback in housing demand. However, “home sales may soon stabilize since mortgage rates have fallen to near 5%, thereby giving an additional boost of purchasing power to home buyers,” says Lawrence Yun, chief economist for the National Association of Realtors. Inflation appears to have peaked, which has stopped the rapid increase in mortgage rates, says Sam Khater, Freddie Mac’s chief economist. “The market continues to absorb the cumulative impact of the large price and rate increases that led to a plunge in affordability,” Khater says. “As a result, over the rest of the year, purchase demand likely will continue to drag, supply will modestly increase and home price growth will decelerate.”
Housing Starts Weaken in July. Overall housing starts fell 9.6% to a seasonally adjusted annual rate of 1.45 million units in July, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The July reading of 1.45 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Single-family starts decreased 10.1% to a 916,000 seasonally adjusted annual rate and are down 2.1% on a year-to-date basis. This is the lowest reading for single-family home building since June 2020. More declines lie ahead, as single-family permits decreased 4.3% to a 928,000 unit rate and are down 5.9% on a year-to-date basis. NAHB is forecasting 2022 to be the first year since 2011 to record an annual decline in single-family home building. The number of single-family homes permitted but not started construction has likely peaked after rising over previous quarters due to supply-chain issues. In July, there were 146,000 homes authorized but not started construction. This reading is flat year-over-year. As an indicator of the economic impact of housing and as a result of accelerating permits and starts in recent quarters, there are now 816,000 single-family homes under construction. This is 17% higher than a year ago. There are currently 862,000 apartments under construction, up 25% from a year ago with this number continuing to rise. Total housing units now under construction (single-family and multifamily combined) is 21% higher than a year ago.
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