U.S. housing sales dropped more than anticipated last month.
The National Association of Realtors (NAR) found that the Pending Home Sales Index fell 8.6% on Wednesday. Sales of previously owned homes dropped in June for the fifth consecutive month. Pending home sales fell 20% compared to last year. Building permits also declined.
“Contract signings to buy a home will keep tumbling down as long as mortgage rates keep climbing, as has happened this year to date,” says NAR Chief Economist Lawrence Yun. “There are indications that mortgage rates may be topping or very close to a cyclical high in July. If so, pending contracts should also begin to stabilize.”
NAR predicts that overall home sales will be down 22% in 2022.
Mortgage rates are averaging 5.54%, significantly higher than the 2.87% rates in July 2021. Based on a monthly mortgage payment, buying a home in June of this year is 80% more expensive than in June 2019.
After the Fed raised interest rates .75 percentage points, mortgage rates may increase again. Still, with the rising rates and softening demand, housing prices remain high.
Director of operations at Mortgage Bank California Tabitha Mazzara told Forbes that buyers shouldn’t expect housing prices to come down any time soon. Even with rising mortgage rates, Mazzara doesn’t think any dip in prices will be significant. “Things might dip a bit, but there’s no cliff dive that’s going to happen,” Mazzara says.
Even with higher rates, the housing inventory is still low, creating a seller’s market. “We still do not have enough inventory for demand—40% less. Still in favor of the seller but not totally nuts,” said JPAR Real Estate CEO Mark Johnson.