Housing activity in the resale market hasn’t been this bad for over a decade.
Sales of previously owned homes dropped 2.2% in July from the month before to an annualized rate of 4.07 million, the National Association of Realtors said Tuesday. July home sales were 16.6% lower versus last year and underperformed the 4.15 million unit sales predicted by economists polled by Bloomberg.
It was also the lowest sales pace for July since 2010 and the third lowest sales pace in the current housing cycle, NAR Chief Economist Lawrence Yun said in a press call, underscoring the lousy conditions buyers continue to face.
“Two factors are driving current sales activity — inventory availability and mortgage rates,” Yun said in a statement. “Unfortunately, both have been unfavorable to buyers.”
Buyers still searching for a potential home were left with a few more options last month versus June, but not enough to resolve the persistent inventory problems in the resale market.
The share of homes for sale at the end of July reached 1.11 million units, up 3.7% compared to June’s numbers but down 14.6% from a year ago, the NAR reported. There was a 3.3-month supply of unsold inventory at the current sales pace, up from 3.1 months in June but almost half of what’s considered a healthy market.
In July, mortgage rates flirted with 7% all month long. Last week, the average rate on the 30-year fixed mortgage climbed over 7%, reaching the highest level in over two decades, according to Freddie Mac. That is pricing out many budget-conscious homebuyers.
The increase in rates also is prompting homeowners to hoard their lower rates and stay put rather than sell, exacerbating the for-sale housing shortfall.
These days, the newly built homes market is keeping what remains of the housing market afloat amid the shortage of previously owned homes for sale. Almost a third (31.4%) of single-family homes on the market were newly built in the second quarter, Redfin found, the highest share of any second quarter on record.
“Builders are still building but homeowners aren’t selling, so new construction is the only option for many buyers,” said Shuana Pendleton, a Redfin Premier agent in Boise, Idaho, where new homes made up nearly 40% of single-family inventory in the second quarter.
But the inventory shortage goes beyond limiting homebuyer options. Prices for previously owned homes increased in July, reversing five straight months of price declines, Yun said. The median price reached $406,700, up 1.9% from July 2022’s $399,000, NAR found.
“A lot of buyers want to secure a home now because they’re worried prices are going to go back up, and new construction is more plentiful with perks that are hard to pass up. One builder is doing a promotion where buyers get anywhere from $15,000 to $25,000 worth of concessions,” Pendleton added.
Regionally, the West was the only region to register a monthly gain.
Home sales there increased 2.7% from the previous month to an annual rate of 770,000 in July. That was still off by 12.5% from a year ago. The median price in the West was unchanged from a year ago at $610,500.
Sales in the Northeast dropped 5.9% from the annual rate of 480,000 in July, down 23.8% from July 2022. The median price in the Northeast was $467,500, up 5.5% from the prior year.
In the Midwest, home sales were down 3% from one month ago at an annual rate of 960,000 in July, slumping 20% from one year ago. The median price in the Midwest was $304,600, up 3.9% year over year.
Sales in the South declined 2.6% from June to an annual rate of 1.86 million in July, down 14.3% from a year ago. The median price in the South $366,200, an increase of 1.7% from July 2022.
First-time buyers also remain on standby. This group of buyers made up 30% of the sales in July, up from the June’s figure of 27% and 29% of July 2022, the latest data found.
Meanwhile, individual investors and second-home buyers, who account for many cash sales, purchased 16% of homes in July, down from 18% in June but up from 14% last year. This differs from the all-cash sales, which made up 26% of transactions in July, the same as in June but up from 24% in July 2022.