In July, U.S. home sales fell to 4.81 million units, 6 percent less than June’s level and 20 percent below that in July 2020 to set the slowest pace since November 2015, except for the early days of the COVID infestation, the National Association of Realtors (NAR) reported.
Sales of homes priced below $250,000 were off 31 percent in July, year over year. Units listed for $750,000 to $1 million lost 8 percent in sales, while 13 percent fewer houses costing more than $1 million were sold.
“In terms of economic impact, we are surely in a housing recession because builders are not building,” Lawrence Yun, the NAR’s chief economist, said in comments quoted by Yahoo.
There were 1.31 million homes for sale on 1 August, the same number a year earlier. That inventory should be enough for about three months’ sales, the NAR noted.
However, homeowners “are absolutely not” in a recession, Yun added. “Homeowners are still very comfortable financially.”
Stubbornly high prices and rising interest rates have largely closed the market to modest-and-middle-income buyers, especially first-timers.
Also, since 2019, rents have risen to record heights, making it harder for families to save enough money to make the sizable down payments that many mortgage lenders now require.
First-time buyers accounted for 29 percent of home sales last month. Pre-COVID, they usually made about 40 percent of home purchases.
However, the high end of the market continues to see a steady flow of deals.
The median home sale price in July was $403,800, down slightly from June and 10.8 percent above that of a year previous, the slowest monthly rise on an annual basis since July 2020.
Newly listed homes spent an average of 14 days on the market, matching June’s speed record for how quickly homes sell.
“Home listings were nearly twice as likely to have had a price cut in July 2022 compared to a year earlier,” Danielle Hale, Realtor.com’s chief economist, said to Yahoo.
TREND FORECAST: If the housing market is in a recession, it is unlikely to open a large number of new doors to buyers now locked out of home ownership.
A shortage of land, labor, and materials will continue to crimp the number of new homes that can be built. High interest rates and requirements for large cash down payments will keep many working families from qualifying for a mortgage that they could have gotten less than two years ago.
The shortage of available homes is due partly to private equity’s giant footprint in the housing market.
Private investment firms have gobbled up tens of thousands of single-family homes over the past two years to then rent at top dollar to the same families who could have bought the houses not long ago.
We have detailed private equity’s commandeering of the U.S. housing market in articles such as:
- “Rents for Single-Family Homes Reach 15-Year High” (1 Jun 2021)
- “Blackstone Extends Reach Into Housing Market” (29 Jun 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)
Private equity firms’ invasion of the housing market has stirred some concern among government officials (“Private Equity Landlords Draw Regulators’ Attention,” 21 Jun 2022) but it is unclear what power officials might have to curb the practice.
Meanwhile, as we have often said previously, private equity’s role in U.S. housing is helping to create the first generation of Americans since World War Two that will spend their lives renting instead of being able to build pride, equity, and a sense of belonging by owning their own homes.