Sales of previously owned homes fell to their lowest level since the start of the year, highlighting how the rapid rise in mortgage rates has sent the housing market into a state of suspended animation.
Sales of previously owned homes fell by 2.2 percent from a month earlier to a seasonally adjusted annual rate of 4.07 million in July, the National Association of Realtors said Tuesday.
This was the lowest rate of sales since January and close to the lowest since 2010. Wall Street had expected a higher rate of sales.
“Two factors are driving current sales activity – inventory availability and mortgage rates. Unfortunately, both have been unfavorable to buyers,” said Lawrence Yun, NAR’s chief economist.
Sales are being weighed down by rising mortgage interest rates and a small amount of homes on the market. Many homeowners do not want to give up their existing fixed rate mortgage put in place when rates were sometimes lower than three percent. Often, a mortgage on their next home would have an interest rate of six or seven percent—or even higher.
Sales were down more than 18 percent from a year earlier on an unadjusted basis.
Unlike the last time sales were this low—back in 2010—the problem is not primarily a lack of demand. The median price for an existing home in July was $406,700, an increase of 1.9 percent from a year ago. This was the first time in five months that the median price rose, an indication that the recession in the housing market appears to have ended for homeowners.
Despite the increase, the median price is still below the June 2022 peak of $413,800.
According to the National Association of Realtors, around 35 percent of homes are being sold above their asking price. Homes remained on the market for 20 days on average, up from 18 days in July. Last summer, homes were only on the market for 14 days.
The number of homes for sale rose from a month earlier to 1.11 million That is still the smallest total inventory for any July in data back to 1999. The number of single family homes for sale is at the lowest level since the 1980s.
Realtors measure the tightness of the housing market by assessing how many months it would take to sell all the properties on the market at the current rate of sales, with anything below five months considered a tight market. In July this was 3.3 months.
High prices and high mortgage rates are also hurting demand for houses, putting homes financially out of reach for many young families.
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