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Existing home sales fall in August, and prices soften significantly

Sales of used homes fell 0.4% in August from July to a seasonally adjusted annualized rate of 4.80 million units, based on the National Association of Realtors. This is the slowest sales pace since May 2020, when activity stalled very briefly because of the start of the Covid pandemic.

Beyond that, it’s the slowest pace since November 2015. Sales were 19.9% less than in August 2021.

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The sales figures represent closings, so contracts which were likely signed in June and July, when mortgage rates spiked higher and pulled back. The common rate on the favorite 30-year fixed mortgage began June at around 5.5% and raised over 6% by the center of the month, in accordance with Mortgage News Daily. After that it pulled back a little, hanging in the 5.7% range for some of July before dropping further to the reduced 5% range by the end of the month.

The 30-year fixed started this season at 3%. It really is now near 6.5%.

Despite having interest levels making housing less affordable, prices were still greater than this past year. The median price of a preexisting home sold in August was $389,500, up 7.7% from the year ago. Home prices historically decline from July to August, because of seasonality, however the drop this season was wider than usual, suggesting a substantial softening.

From June through August, prices usually decline about 2%, but this season they will have fallen about 6%.

“The housing marketplace is showing an instantaneous impact from the changes in monetary policy,” said Lawrence Yun, chief economist for the Realtors, noting he will revise his annual sales forecast down further because of higher mortgage rates. “Some markets could be seeing price declines.”

Sales fell in every price categories, but more sharply on the low end. Sales of homes priced between $250,000 and $500,000 were down 14% year over year, while sales of these priced between $750,000 and $1 million were down just 3%. A lot of that has regarding supply, that is leanest on the low end of the marketplace.

Prices remain being bolstered by tight supply. There have been 1.28 million virginia homes by the end of August, unchanged from the year ago. At the existing sales pace, that represents a 3.2-month supply.

“In July, we saw the initial sign that the housing market’s refresh may affect homeowners’ eagerness to market, and that hesitation continued in August, because the amount of newly-listed homes sank by 13%,” said Danielle Hale, chief economist for Realtor.com.

Homebuilders have already been pulling back the facial skin of falling demand, but there is a little bump in single-family housing starts in August, based on the U.S. Census. That could have been because of brief drop in mortgage rates during, which sparked more interest from buyers. But building permits, which are an indicator of future construction, fell as mortgage rates were likely to rise again.

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