Existing home sales in the US fell 2.2% last month, data released on Tuesday showed.
July’s 4.07 million pace was below estimates. The range of forecasts from nearly five-dozen people who make guesses for a living (bless their hearts) was 4 million to 4.22 million.
The decline came on the heels of an unrevised 3.3% drop in June and marked an extension of a virtually uninterrupted streak.
Sales have fallen pretty much every month since early last year.
This is the same story over and over again. Homeowners with four- and five-handle mortgages aren’t excited about the prospect of much higher borrowing costs for any portion of a trade-up they might otherwise be inclined to finance. So, they don’t sell.
Demand, meanwhile, remains robust despite what, for younger buyers, appear to be onerous mortgage rates. As a quick aside, we shouldn’t lose track of the fact that people’s expectations are conditioned on what they know. Telling newlywed thirtysomethings that 7% actually isn’t high from a historical perspective is pointless. If you’re 30 now, you were nine when mortgage rates were last 7%.
In any case, demand outstrips supply for resale properties in the US and the longer “high” mortgage rates stay “high,” the longer that situation will persist, barring a recession and job losses that force existing homeowners to sell. This month’s selloff in long-end US Treasurys nudged rates even higher to new multi-decade peaks.
“Two factors are driving current sales activity — inventory availability and mortgage rates,” NAR Chief Economist Lawrence Yun said Tuesday. “Unfortunately, both have been unfavorable to buyers.”
Yes, “unfortunately.” The supply-demand imbalance is still supporting prices. The median was $406,700 last month.
After a brief run of YoY declines, prices are now rising again when measured against the same month a year ago.
Would-be buyers are thus being squeezed on both sides of the equation: Prices are at or near records in many parts of the country and financing costs are the highest in living memory for anyone under, say, 40. Inventories rose in July from June, but fell nearly 15% from last year.
There’s really not much else to say. As Yun put it, “most homeowners continue to enjoy large wealth gains [but] many renters are facing growing affordability challenges.”
