Housing sales fell for the sixth straight month in July.
Six months of decline marks the longest downward trend of home sales in eight years. Previously owned home sales dropped 5.9%, the slowest sale pace since November 2015. The number of July sales this year are 20.2% lower than the same time last year.
In addition to previously owned homes, new home construction is dropping off. Housing starts fell 9.6% in July. Building permits were down 1.3%. For the fifth time in a row, permits and starts for single family homes were down in July, Barron’s reported.
The prices of homes are beginning to fall for the first time since January. In June, the median price of an existing home was $413,800, a record high. Now, the median price is $403,800, The Wall Street Journal reports.
Prices typically decline somewhat in July, but Nationwide economist Scott Murray thinks the decline is just the beginning. “We’re going to see a deceleration as we get toward the end of this year and early next year,” he says.
Higher mortgage rates shoulder part of the blame for the slowing market. Freddie Mac reported that the average 30-year mortgage rate is 5.13% this week. Last year, rates were at 2.86%. “We are in a housing recession,” said National Association of Realtors economist Lawrence Yun.
Why it’s news
The housing market has been booming over the last few years, with record-low mortgage rates and unusually high demand for homes.
Declining sales don’t necessarily mean fewer people want to buy—they either can no longer afford the higher monthly payment or they can’t find a home.
With 30-year mortgage rates at 5.13% and the median home price $403,800, homeownership is slipping out of reach for some buyers.
Concerns about housing affordability have been rising. Pre-pandemic, homeowners spent 15% of their paychecks on their mortgage, now they’re paying 25%, The Wall Street Journal reports.
While companies like Flow seek to alleviate housing shortages, prospective buyers are left scrambling in the meantime.
“In terms of economic impact we are surely in a housing recession because builders are not building. However, are homeowners in a recession? Absolutely not. Homeowners are still very comfortable financially,” National Association of Realtors economist Lawrence Yun.