Activity in America’s perennially beset resale housing market was “remarkably stable” last month, the NAR said Tuesday, in what I’d describe as another uninspired update on closings.
Although the association’s unflappably chipper chief economist Lawrence Yun struck an upbeat tone, existing home sales posted a second straight monthly decline, leaving the annual rate at a lackluster 4.06 million.
As the figure below reminds you, the market slumped when the Fed began raising rates in 2022 and hasn’t recovered since.
The decline for July — 1.7% — wasn’t large, but it was more pronounced than the minuscule drop consensus expected.
It’s hard for me to call that good news. Yun found a way to spin it, though, namely by saying the figures could’ve been worse under the circumstances. That sales slipped less than 2% with mortgage rates near the highest in a year speaks to a measure of resilience, he suggested.
The median price, which hit a record in June, slipped to $434,100 in July. Although prices fell MoM, the YoY increases are actually accelerating, although I’ll confess “accelerate” might be a bit strong.
The annual pace of price appreciation in July rounded up to 2%. As the figure shows, it was as slow as 0.30% in December.
Price growth’s undershooting wage growth now, which means homes are getting more affordable at the margins. But that’s a glacial process. And as discussed at length here last week, the “median” family hasn’t been able to comfortably afford the median-priced home in America since 2021.
In his Tuesday editorial, Yun said that in “smaller cities, and particularly in the Midwest, an annual household income of $60,000 would be sufficient to buy a median-priced home.” So, just move to a small city in the middle of nowhere. Problem solved!
In the same remarks, Yun declared that if only mortgage rates would retrace to around 6%, “there’s no doubt the housing market would be thriving.”
Put differently: “Were it not for the war…”
With the oil situation (war) and the Japanese yen crisis, it’ll be very unlikely interest rates will go down. More likely to go up or with government pressure, stay the same.
I’ve got some rental units in the Midwest and I’ve been tempted to add more. I’m seeing a lot of price cuts and townhomes sitting on the market that would provide good cashflows especially if mortgage rates drop back to 4%. I know people are skeptical that we’ll see those rates again anytime soon, but it would not surprise me one bit.
My main hesitation is that lower rates would portend an economy in rough shape.
For a few years now the real estate industry has described interest rates as the main obstacle holding back the next “Oklahoma Land Rush” nation-wide. While I am certain lower rates would definitely help, prices are still too high –as are taxes and insurance — and the jobs aren’t necessarily where the more affordable homes are either. Try to buy anything near a major metropolitan area and you are looking at prices that are twice or even three-times the national average.
I completely agree. The land costs anywhere near the established downtown are too high per finished unit to be “affordable “ housing, even near the median price of $434,000.
The starter homes in our region are stretching out into former farm land that is being rezoned for multi family housing. The only problem is the jobs are a 40-60 minute commute in bumper to bumper traffic. So, the joyful “lifestyle” of owning your own piece of real estate is greatly diminished and scuffed up by urban expansion to huge grids of identical high conformity homes with no mature trees. Lots of prairie for everybody’s barking dog who is left in the backyard all day alone. Suburbia !