The number of sales of previously owned houses dropped to its lowest level since the beginning of the year, demonstrating how the housing industry has entered a state of suspended animation as a result of the sharp increase in mortgage rates.
The National Association of Realtors declared this week that the number of previously owned houses sold in July decreased by 2.2 percent compared to a month earlier resulting in a seasonally adjusted yearly pace of 4.07 million.
This was the lowest pace of sales since January and nearly as low as it has been since 2010. Wall Street had hoped that the rate of sales would be higher.
“There are two things that are driving sales right now: the number of homes for sale and the interest rates on mortgages. Both have been bad for buyers, though,” said Lawrence Yun, the top economist for the NAR.
Sales are slowing down because mortgage interest rates are going up and there aren’t many homes on the market. Many homeowners don’t want to get rid of their fixed-rate mortgages because they were set up when rates were sometimes less than 3%. They frequently faced mortgages with interest rates of six to seven percent—or even higher—for their subsequent property.
Without making any changes, sales decreased by more than 18% from the same time last year.
In contrast to the previous time sales were this low, in 2010, the issue now is not simply a deficiency in demand. In July, the typical price of a current home was $406,700, which is 1.9 percent more than it was a year ago. This marked the first time within five months that the median cost of a home went up, which shows that the housing market slump for homeowners seems to be over.
Even with the rise, the median price continues to be less than the peak of $413,800 for June 2022.
The National Association of Realtors says that about 35% of homes are sold for more than what was asked for. An increase from 18 days in July to an average of 20 days for homes on the market. Last summer, houses were only for sale for 14 days.
Since last month, there are now 1.11 million houses for sale. Since records began in 1999, that is still the smallest amount of stock for any July. Since the 1980s, this is the lowest number of single-family houses for sale.
Realtors determine how tight a market is by estimating how long it would require to sell every available property at the present rate of sales; anything under five months is regarded as tight. The duration was 3.3 months in July.
The desire for houses is also hurt by high prices and high mortgage rates, which make homes too expensive for many young families to buy.