Existing Home Sales Hit Six-Month Low as Mortgage Rates Soar

Sales of existing homes in the United States fell to their lowest level in six months in July, as homeowners who benefit from cheap mortgages refrained from selling their properties, the cost of new mortgages for l purchase of another home being the highest in decades.

This limited supply, however, helped push prices up year-on-year for the first time since January.

Existing home sales fell 2.2% in July to a seasonally adjusted annual rate of 4.07 million units, the lowest level since January, from 4.16 million units in June , according to the National Association of Realtors. Economists polled by Reuters had expected home sales to be little changed, at 4.15 million units.

Sales fell in the Northeast, Midwest and South, but rose in the West. All regions experienced an annual decline in sales.

Home resales, which account for a large portion of U.S. home sales, fell 16.6% in July year-on-year.

House prices have bottomed after coming under pressure from aggressive Federal Reserve interest rate hikes, but the continued shortage of real estate for sale could limit any rebound as many potential buyers are squeezed out of the market.

Mortgage rates have risen again recently to the highest levels in decades, with the average rate for the popular 30-year fixed-rate mortgage rising above 7% in the past week, according to the mortgage finance giant. Freddie Mac.

Last month, 1.11 million second-hand homes were put on the market, up 3.7% from the previous month, but down 14.6% from July 2022. Pace of sales July, it would take 3.3 months to exhaust the current stock of existing homes, compared to 3.2 months a year ago.

A supply of four to seven months is considered a healthy balance between supply and demand. The median price of existing homes rose 1.9% from a year earlier to $406,700 in July. This is the fourth time it has topped $400,000.

“Two factors are driving current sales: inventory availability and mortgage rates,” said Lawrence Yun, chief economist at NAR. “Unfortunately, both of these factors worked against buyers.

Properties remained on the market for 20 days in July, compared to 14 days a year ago. Seventy-four percent of homes sold in July remained on the market for less than a month. First-time buyers accounted for 30% of sales, compared to 29% a year ago.

Cash sales accounted for 26% of transactions, compared to 24% a year ago. Distressed sales, including foreclosures, accounted for 1% of transactions, virtually unchanged from June and the year before. (Reporting by Safiyah Riddle; Writing by Paul Simao)