Existing home sales in the US fell again, but prices rose from a year earlier

Aug 22 (Reuters) – U.S. existing home sales fell to a six-month low in July as homeowners tied up with cheap mortgages were reluctant to sell as the cost of a new mortgage to buy another home reached its highest level in decades.

However, this limited inventory helped push prices up year-on-year for the first time since January.

The National Association of Realtors said on Tuesday that existing home sales fell 2.2% in July to a seasonally adjusted annual rate of 4.07 million units, the lowest level since January, from an unadjusted 4.16 million units in June. Economists polled by Reuters had expected home sales to be little changed at 4.15 million units.

Sales fell in the Northeast, Midwest and South, but picked up in the West, where home prices fell sharply in the past year. All regions experienced a decrease in annual sales.

Resale home sales, which account for a large portion of US home sales, fell 16.6% year-on-year in July.

Home prices have bottomed out after being pressured by aggressive interest rate increases by the Federal Reserve, but a persistent shortage of properties for sale could limit any recovery as many potential buyers are forced out of the market.

Mortgage rates have risen again recently to their highest levels in decades, with the average interest rate on a 30-year fixed-rate mortgage exceeding 7% in the latest week, according to mortgage financing giant Freddie Mac.

There were 1.11 million previously owned homes on the market last month, up 3.7% from the previous month but down 14.6% from July 2022. Based on the sales pace in July, it would take 3.3 months to deplete the current inventory of existing homes, up from 3.2 months earlier in the year. .

The four to seven month supply is seen as a healthy balance between supply and demand. The median existing home price rose 1.9% from a year earlier to $406,700 in July, marking the fourth time the home price has surpassed $400,000.

“Two factors are driving current sales activity – inventory availability and mortgage rates,” said Lawrence Yoon, chief economist at NAR. ‘Unfortunately, both were unsuitable for buyers.’

“lock effect”

A dearth of existing homes on the market has helped boost new home construction and sales in recent months. NAR predicted that total new home sales in 2023 would decline by 12.9% from 2022, at the same time that total new home sales in 2023 would rise by 12.3%.

The Commerce Department is scheduled to release new home sales data for July on Wednesday. Economists polled by Reuters see a modest rise in transactions. New home sales have outperformed existing home sales so far this year.

Properties are usually on the market for 20 days in July, compared to 14 days last year. Seventy-four percent of homes sold in July have been on the market for less than a month. First-time buyers account for 30% of sales, compared to 29% a year ago.

Sales fell at least for homes priced over $1 million, Yoon said, as supply was less constrained by demand than for lower-value homes.

Cash sales accounted for 26% of transactions compared to 24% a year earlier. Disrupted sales, including foreclosures, accounted for 1% of transactions, essentially unchanged from June and a year earlier.

Yoon said it’s “nobody’s guess” when mortgage rates might start to ease, and some economists don’t expect much easing until 2024.

“Predicting near-term mortgage rates is very difficult, but we expect mortgage rates to start to normalize next year,” said Matthew Walsh, an economist at Moody’s who focuses on the housing market.

That may encourage some homeowners to re-sell and look for more new homes, he said, but it may take some time before current rates can compete with the mortgages that the majority of existing homeowners took out before interest rates rose.

“We expect the impact of the lockdown to continue for some time,” Walsh said.

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