Sales of existing homes slipped 0.4 percent in August from July and fell 19.9 percent below August 2021, making it the slowest sales month since May 2020 when the housing market froze at the onset of the COVID panic.
Aside from that blip, August was the worst sales month for existing home sales since November 2015.
August also was the seventh consecutive month of sliding home sales.
Sales fell most among homes priced from $250,000 to $500,000 and slipped just 3 percent among homes costing $750,000 to $1 million.
New listings of homes for sale tumbled 13 percent in August, Realter.com noted.
Potential sellers may have decided to wait as they saw prices falling, Danielle Hale, Realtor.com’s chief economist, said in comments quoted by CNBC.
Sales of home-related items such as appliances and furniture have slumped along with home sales.
Sales of houses slid as interest rates climbed.
The average national interest rate on a 30-year, fixed-rate mortgage began this year at about 3 percent and had reached 5.5 percent by 1 June.
On 23 September, the rate was 6.43 percent, according to Bankrate.com, its highest since October 2008. The Federal Home Loan Mortgage Corporation pegged last week’s average rate at 6.29 percent.
The rate was 6.55 percent on Monday, 26 September, Bankrate.com said.
The median price of an existing home sold in August was $389,500, up 7.7 percent year on year but down about 5.7 percent from $413,500, the prevailing median in this year’s second quarter, the National Association of Realtors (NAR) reported.
Prices usually edge down in August by about 2 percent as the peak selling season winds down, but this year’s drop was almost triple that amount.
“The housing market is showing an immediate impact from changes in monetary policy,” Lawrence Yun, NAR’s chief economist, said in announcing August’s figures.
Home prices remain 45 percent higher than they were in February 2020, according to the S&P CoreLogic Case-Shiller National Home Price Index.
However, homes are even less affordable now than in 2006 when soaring home prices helped to crash the economy into the Great Recession, according to NAR data that combines median family incomes, mortgage interest rates, and median household incomes.
Analysts said again that a housing market collapse, such as the one that introduced the Great Recession in 2006, cannot happen now.
Homeowners collectively have far more equity in their homes now than then, subprime mortgages are largely a thing of the past, and the rampant market in fraudulent mortgage derivatives that prevailed then has disappeared.
Also, there were 1.3 million homes up for sale at the end of August, only about a third of the 3.8 million that flooded listings in summer 2006.
New housing starts jumped 12.2 percent in August from July, but most of the new construction is in multifamily homes, reflecting the continuing demand for rentals by people priced out of home ownership.
TRENDPOST: In articles such as our “U.S. Market Overview” (28 Sep 2021) and “Community Bankers: Housing Crash Coming?” (19 Oct 2021), we have correctly been forecasting for more than a year that when the U.S. Federal Reserve raised its fed funds rate to or above 1.5 percent, the housing market would begin a deep slump.
The market crashed first for modest- and middle-income households, as fewer were able to afford down payments or qualify for mortgages at higher interest rates.
The figures prove the point: the percentage of homes sold to first-time buyers has been steadily slipping in recent months. Historically, those buyers make up 40 percent of the market; by February of this year, they comprised just 29 percent.
Since then, the proportion has ticked up into the low 30 percent range but still well below historical levels.
Now the new figures cited in the article above show that the middle of the market—homes priced from $250,000 to $500,000—also has collapsed, in part because prices have been pushed up so much that fewer houses fall into that category.
TREND FORECAST: The combination of higher interest rates, a recession knocking on the door, and general fears about the economic future will continue to pucker the U.S. market for single-family homes.
Median sale prices will soften but remain elevated compared to their pre-COVID War levels.
However, a high median sale price should not be confused with a healthy market. As long as the median price stays elevated in a sinking economy, the housing market will be failing millions of potential buyers.
TREND FORECAST: We have said many times, in articles such as “Home Sales Fall as Inventory Dries Up, Prices Climb” (25 May 2021), “U.S. Home Sales, Price Rose Again in September” (26 Oct 2021), and “Middle-Income Buyers Too Poor to Buy Homes” (22 Feb 2022) that the COVID-era surge in the U.S. home market has shut out first-time buyers and created at least one generation that will be denied the opportunity to create wealth by building equity through home ownership.
A significant share of the wealth that is being built is accruing to private equity firms, which swept into the housing market in 2020, buying thousands of houses in the most competitive real estate markets.
The firms are buying the houses, often for cash, to rent out at premium prices now that more people are forced to rent after being shut out of the housing market.
We have documented private equity firms’ commandeering of the U.S. housing market in such articles as:
- “Real Estate Investors Choosing Single-Family Rental Homes” (13 Oct 2020)
- “Invitation Homes to Buy $1 Billion Worth of Houses This Year” (1 Jun 2021)
- “Blackstone Extends Reach Into Housing Market” (29 Jun 2021)
- “Private Equity Partners Target $5 Billion in Rental Houses” (27 Jul 2021)
- “Residential Rental Rates Skyrocketing” (10 Aug 2021)
- “Rents Soar as Investors Buy Properties and Raise Rates” (14 Sep 2021)
- “Investors Now Targeting Off-Campus Student Housing” (14 Sep 2021)
- “Rents Soaring. What’s Next?” (21 Sep 2021)
- “Single-Family Rental Homes: Investments Galore” (16 Nov 2021)
- “Home Sales Up as Money Gang Gobbles Up Houses” (23 Nov 2021)
- “Rents on the Rise” (11 Jan 2022)
TRENDPOST: Today, S&P CoreLogic Case-Shiller Index reported that U.S. home prices declined in July at the fastest rate in history.
While still higher than they were last year, nationally, prices climbed 15.8 percent over July 2021. Prices increased 18.1 percent the previous month, according to the report.
As reported by CNBC, “July’s report reflects a forceful deceleration,” wrote Craig J. Lazzara, managing director at S&P DJI in a release, noting the difference in the annual gains in June and July. The 2.3 percentage point “difference between those two monthly rates of gain is the largest deceleration in the history of the index.”
“For homeowners planning to list, today’s market is significantly different than the one from even 3 weeks ago,” said George Ratiu, senior economist and manager of economic research at Realtor.com.
“As the Federal Reserve continues to move interest rates upward, mortgage financing has become more expensive, a process that continues to this day. Given the prospects for a more challenging macroeconomic environment, home prices may well continue to decelerate,” Lazzara said.