Woe to the housing bubble: house prices fall by 3.5%, the strongest monthly decline since January. 2016. Sales, already at lockdown levels, drop further. Active ads go up further

But these sales came during the Fed’s pivot fantasy that pushed mortgage rates to 5%. Mortgage rates are now close to 6.5%.

By Wolf Richter for WOLF STREET.

In July and through mid-August, mortgage rates dropped sharply from the 6% range in mid-June, on the widely held fantasy of a Fed “pivot” on rate hikes. By mid-August, the average 30-year mortgage rate had dropped to 5%. Yesterday they were at 6.47%. But the short interval of falling mortgage rates slowed the decline in home sales – sales fell again in August since July but at a slower pace – with real estate agents in mid-August talking about the market awakening.

But prices fell for the second month in a row, and in a big way, amid widespread price cuts, and that also helped close some deals.

The average price of existing single-family homes, condominiums and co-operatives whose sales were closed in August fell 3.5% in August compared to July, the highest percentage decline since January 2016, after falling 2.4% in the previous month, for $ 389,500, according to the National Association of Realtors. While some seasonality is involved, the percentage drop was much larger than normal in August, reducing year-over-year price increases to 7.7%, down from last summer’s 25% year-over-year increases ( data via YCharts):

In the West, the price falls they advanced further, amid poor sales. For example, in San Francisco and Silicon Valley, median prices have plummeted in recent months, now declining year-on-year in San Francisco and Santa Clara County (San Jose) and rising by just a hair in San County. Mateo, according to data from the California Association of Realtors.

Sales of existing homes, condos and co-operatives in the United States fell slightly since July, after falling 5.9% in the previous month, to a seasonally adjusted annual sales rate of 4.80 million homes, roughly in line with the June 2020 lockout, according to the National Association of Realtors in its report. This was the seventh consecutive month of monthly declines.

Beyond the blocking months, it was the lowest sell rate since 2014 and down 29% since October 2020 (historical data via YCharts):

Single-family home sales fell 0.9% in August from July and 19% year-over-year, to a seasonally adjusted annual rate of 4.28 million homes.

Sales of condominiums and co-operatives have increased 4% since July, to 520,000 seasonally adjusted annual rate, down 25% year-over-year.

Compared to August last year, sales fell 20%, the 13th consecutive month of year-over-year declines, based on seasonally adjusted annual sales rate (historical data via YCharts):

Sales by region: On an annual basis, sales fell dramatically in all regions. On a monthly basis (mom), you can see a small increase in two of the four regions:

  • Northeast: + 1.6% m / m; -13.7% on an annual basis
  • Midwest: -3.3% m / m; -15.9% year.
  • South: 0% mom; -19.3% year.
  • West: + 1.1% m / m; -29.0% year.

Sales fell across all price ranges, but fell more at the low end.

Sales volume has been low because potential sellers cling to their once-ambitious pricing, when mortgage rates were 3%, and many would prefer to keep the home off the market or take it off the market rather than sell for less, as long as what a Power. But the price cuts have now taken off from sellers wanting to sell.

Price reductions it began to rise in May from record lows of last winter and spring, when sales stalled and mortgage rates soared. In July, they hit their highest level since 2019, according to data from realtor.com. In August, price cuts eased slightly as sellers might have assumed that price cuts were less necessary, amid the pivot of falling mortgage rates and the Fed in July and August:

Active ads – total inventory for sale minus properties with pending sales – jumped to 779,400 homes in August, the highest since October 2020, up 27% from a year ago, according to data from realtor.com:

The National Association of Realtors is clamoring for the construction of more single-family homes. But the builders of houses, they are having trouble selling homes they have already built or are building, sales have plummeted, inventories have soared since 2008, and home builders have begun to cut prices, lower mortgage rates, and build up other incentives to move the their inventory.

Investors or buyers of second homes bought 16% of the homes in August, up from 14% in July, but down from the 17% -22% range in spring and winter, according to NAR data.

“All in cash” buyers.which includes many investors and second home buyers, it remained at 24% of total sales, down from a share of 25% to 26% from April to June.

Moving forward: Holy Moly mortgage rates. After the imaginative decline from 6% in mid-June to 5% in mid-August, mortgage rates are now well above 6%.

The daily measure of the average 30-year mortgage rate is 6.47%, according to Mortgage News Daily.

According to Freddie Mac’s weekly measure released last week, based on mortgage rates earlier last week, it jumped to 6.02%, more than double a year ago. These mortgage rates in excess of 6% are still very low, considering that CPI inflation is above 8%. But they are catching up.

And potential sellers who clung to their homes in July and August because they didn’t want to hit the price the buyers were at – hoping the “pivot” fantasy would push mortgage rates further down – now have to deal with effects of this 6% – plus mortgage rates:

Do you enjoy reading WOLF STREET and want to support it? Using ad blockers – I fully understand why – but do you want to support the site? You can donate. I appreciate it immensely. Click on the mug of beer and iced tea to find out how:

Do you want to be notified by email when WOLF STREET publishes a new article? Sign up here.

Leave a Comment

%d bloggers like this: