The US real estate market just went from hot to a recession in a matter of weeks. The National Association of Realtors (NAR) reported existing-home sales fell for a sixth consecutive month in July. Buyers are now buying the fewest homes since the start of public health measures. NAR even went so far as to declare a housing recession for sales, though they explained prices have yet to reflect that sentiment.
US Home Sales Fall To The Lowest Level Since May 2020
US existing-home sales made a substantial dip last month. Just 4.81 million homes were sold in July at the seasonally adjusted annual rate (SAAR), down 5.9% from the month before. Higher mortgage rates and frothy valuations have sales 20.2% lower than the same month last year. It was the sixth consecutive month to show a drop and the fewest sales since May 2020, back when… well, people were hoarding toilet paper instead of homes.
Inventory Is Flat, But Facing 20% Fewer Buyers
US existing-home inventory has been tumbling too. NAR reported 1.3 million units for sale in July, about 4.8% higher than a month before. It’s a level unchanged from last year, but with 20% fewer sales, inventory isn’t nearly as tight. That’s great news for buyers, not so great news for recent investors.
Home Prices Are Still Elevated, But Fell For The First Time In Months
Fewer home sales and more inventory resulted in the first price drop in months. The median sale price fell to $403,800 in July, down 2.4% (-$10,000). Prices have now rolled back to April 2022 levels, but remain 10.8% (+$39,200) higher than last year. Still massive gains from last year, but the sudden decline in price is substantial. It would only take 4 months of prices falling at this rate to reverse the past year of gains.
US Real Estate Industry Declared A “Housing Recession” For Sales
If the divergence sounds ominous, that’s because it is right now. “”We’re witnessing a housing recession in terms of declining home sales and home building,” said NAR Chief Economist Lawerence Yun.
He added, “however, it’s not a recession in home prices. Inventory remains tight and prices continue to rise nationally with nearly 40% of homes still commanding the full list price.”
That’s an interesting way the majority of sales didn’t sell for full list price, but moving on…
Existing-home prices didn’t surge as high as other countries, though the sudden acceleration was enough for the US Federal Reserve to sound the alarm. The central bank’s Dallas branch declared the market a bubble, with other branch chiefs expressing concerns about the market. Since they’ve also reaffirmed their commitment to bringing inflation lower, there’s more reasons to see price growth slow than accelerate.