Monthly Archives: August 2022

Existing home sales fall 20% | Pound Ridge Real Estate

Existing-home sales sagged for the sixth straight month in July, according to the National Association of REALTORS®. All four major U.S. regions recorded month-over-month and year-over-year sales declines.

Total existing-home sales,1 https://www.nar.realtor/existing-home-sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, slipped 5.9% from June to a seasonally adjusted annual rate of 4.81 million in July. Year-over-year, sales fell 20.2% (6.03 million in July 2021).

“The ongoing sales decline reflects the impact of the mortgage rate peak of 6% in early June,” said NAR Chief Economist Lawrence Yun. “Home sales may soon stabilize since mortgage rates have fallen to near 5%, thereby giving an additional boost of purchasing power to home buyers.”

Total housing inventory2 registered at the end of July was 1,310,000 units, an increase of 4.8% from June and unchanged from the previous year. Unsold inventory sits at a 3.3-month supply at the current sales pace, up from 2.9 months in June and 2.6 months in July 2021.

The median existing-home price3 for all housing types in July was $403,800, up 10.8% from July 2021 ($364,600), as prices increased in all regions. This marks 125 consecutive months of year-over-year increases, the longest-running streak on record.

“We’re witnessing a housing recession in terms of declining home sales and home building,” Yun added. “However, it’s not a recession in home prices. Inventory remains tight and prices continue to rise nationally with nearly 40% of homes still commanding the full list price.”

Properties typically remained on the market for 14 days in July, the same as in June and down from 17 days in July 2021. The 14 days on market are the fewest since NAR began tracking it in May 2011. Eighty-two percent of homes sold in July 2022 were on the market for less than a month.

First-time buyers were responsible for 29% of sales in July, down from 30% in June and also in July 2021. NAR’s 2021 Profile of Home Buyers and Sellers – released in late 20214 – reported that the annual share of first-time buyers was 34%.

All-cash sales accounted for 24% of transactions in July, down from 25% in June, but up from 23% in July 2021.

Individual investors or second-home buyers, who make up many cash sales, purchased 14% of homes in July, down from 16% in June and 15% in July 2021.

Distressed sales5 – foreclosures and short sales – represented approximately 1% of sales in July, essentially unchanged from June 2022 and July 2021.

According to Freddie Mac, the average commitment rate (link is external)for a 30-year, conventional, fixed-rate mortgage was 5.41% in July, down from 5.52% in June. The average commitment rate across all of 2021 was 2.96%.

Realtor.com®’s Market Trends Report(link is external) in July shows that the largest year-over-year median list price growth occurred in Miami (+36.2%), Memphis (+32.7%) and Orlando (+28.4%). Phoenix reported the highest increase in the share of homes that had their prices reduced compared to last year (+31.8 percentage points), followed by Las Vegas (+28.6 percentage points) and Austin (+27.8 percentage points).

Single-family and Condo/Co-op Sales

Single-family home sales declined to a seasonally adjusted annual rate of 4.31 million in July, down 5.5% from 4.56 million in June and down 19.0% from one year ago. The median existing single-family home price was $410,600 in July, up 10.6% from July 2021.

Existing condominium and co-op sales were recorded at a seasonally adjusted annual rate of 500,000 units in July, down 9.1% from June and down 29.6% from one year ago. The median existing condo price was $345,000 in July, an annual increase of 9.9%.

“Buying a home remains a worthwhile investment that brings an unmatched combination of security, freedom and accomplishment associated with the American Dream,” said NAR President Leslie Rouda Smith, a REALTOR® from Plano, Texas, and a broker associate at Dave Perry-Miller Real Estate in Dallas. “REALTORS® serve as consumer champions who provide trusted guidance and insight to help home buyers and sellers achieve their goals.”

Regional Breakdown

Existing-home sales in the Northeast slid to an annual rate of 620,000 in July, down 7.5% from June and 16.2% from July 2021. The median price in the Northeast was $444,000, an increase of 8.1% from the previous year.

Existing-home sales in the Midwest declined 3.3% from the prior month to an annual rate of 1,190,000 in July, dropping 14.4% from July 2021. The median price in the Midwest was $293,300, up 7.0% from the previous year.

Existing-home sales in the South waned 5.3% in July to an annual rate of 2,130,000, down 19.6% from one year ago. The median price in the South was $365,200, an increase of 14.7% from July 2021.

Existing-home sales in the West retracted 9.4% compared to last month to an annual rate of 870,000 in July, down 30.4% from this time last year. The median price in the West was $614,900, an 8.1% jump from July 2021.

“The action is in the pricey West region which experienced the sharpest sales decline combined with a sizable inventory increase,” Yun said. “It’s likely some Western markets will see prices decline, and that will be welcome news for buyers who watched rapid price jumps during the past two years.”

The National Association of REALTORS® is America’s largest trade association, representing more than 1.5 million members involved in all aspects of the residential and commercial real estate industries.

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For local information, please contact the local association of REALTORS® for data from local multiple listing services (MLS). Local MLS data is the most accurate source of sales and price information in specific areas, although there may be differences in reporting methodology.

NOTE: NAR’s Pending Home Sales Index for July is scheduled for release on August 24, and Existing-Home Sales for August will be released on September 21. Release times are 10 a.m. Eastern.

1 Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings from Multiple Listing Services. Changes in sales trends outside of MLSs are not captured in the monthly series. NAR benchmarks home sales periodically using other sources to assess overall home sales trends, including sales not reported by MLSs.

Existing-home sales, based on closings, differ from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which account for more than 90% of total home sales, are based on a much larger data sample – about 40% of multiple listing service data each month – and typically are not subject to large prior-month revisions.

The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.

Single-family data collection began monthly in 1968, while condo data collection began quarterly in 1981; the series were combined in 1999 when monthly collection of condo data began. Prior to this period, single-family homes accounted for more than nine out of 10 purchases. Historic comparisons for total home sales prior to 1999 are based on monthly single-family sales, combined with the corresponding quarterly sales rate for condos.

2 Total inventory and month’s supply data are available back through 1999, while single-family inventory and month’s supply are available back to 1982 (prior to 1999, single-family sales accounted for more than 90% of transactions and condos were measured only on a quarterly basis).

3 The median price is where half sold for more and half sold for less; medians are more typical of market conditions than average prices, which are skewed higher by a relatively small share of upper-end transactions. The only valid comparisons for median prices are with the same period a year earlier due to seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if additional data is received.

The national median condo/co-op price often is higher than the median single-family home price because condos are concentrated in higher-cost housing markets. However, in a given area, single-family homes typically sell for more than condos as seen in NAR’s quarterly metro area price reports.

4 Survey results represent owner-occupants and differ from separately reported monthly findings from NAR’s REALTORS® Confidence Index, which include all types of buyers. The annual study only represents primary residence purchases, and does not include investor and vacation home buyers. Results include both new and existing homes.

5 Distressed sales (foreclosures and short sales), days on market, first-time buyers, all-cash transactions and investors are from a monthly survey for the NAR’s REALTORS® Confidence Index, posted at 

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Single family housing starts fall in July | Bedford Corners Real Estate

A sharp decline in single-family home construction is another indicator that the housing slowdown is showing no signs of abating, as rising construction costs, elevated mortgage rates and supply chain disruptions continue to act as a drag on the market.

Overall housing starts fell 9.6% to a seasonally adjusted annual rate of 1.45 million units in July, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The July reading of 1.45 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months.

Single-family starts decreased 10.1% to a 916,000 seasonally adjusted annual rate and are down 2.1% on a year-to-date basis. This is the lowest reading for single-family home building since June 2020. More declines lie ahead, as single-family permits decreased 4.3% to a 928,000 unit rate and are down 5.9% on a year-to-date basis. NAHB is forecasting 2022 to be the first year since 2011 to record an annual decline in single-family home building.

A housing recession is underway with builder sentiment falling for eight consecutive months, while the pace of single-family home building has declined for the last five months. The decline in single-family starts is reflected in the HMI measure of builder sentiment, as housing demand continues to weaken on higher interest rates while on the supply side builders continue to grapple with higher construction costs. Builders are reporting weakening traffic as housing affordability declines.

The multifamily sector, which includes apartment buildings and condos, decreased 8.6% to an annualized 530,000 pace. Multifamily construction remains very strong given solid demand for rental housing. The number of multifamily 5+ units currently under construction is up 24.8% year-over-year. Multifamily development is being supported by a substitution effect, with frustrated or priced out prospective home buyers seeking rental housing.

The number of single-family homes permitted but not started construction has likely peaked after rising over pervious quarters due to supply-chain issues. In July, there were 146,000 homes authorized but not started construction. This reading is flat year-over-year. In contrast, the number of multifamily 5+ units permitted but not started construction continues to rise, up 47% year-over-year to 147,000 units.

On a regional and year-to-date basis, combined single-family and multifamily starts are 10.7% higher in the Northeast, 0.4% lower in the Midwest, 6.5% higher in the South and 2.2% lower in the West. Looking at regional permit data on a year-to-date basis, permits are 1.9% lower in the Northeast, 1.9% higher in the Midwest, 2.6% higher in the South and 0.2% higher in the West.

As an indicator of the economic impact of housing and as a result of accelerating permits and starts in recent quarters, there are now 816,000 single-family homes under construction. This is 17% higher than a year ago. There are currently 862,000 apartments under construction, up 25% from a year ago with this number continuing to rise. Total housing units now under construction (single-family and multifamily combined) is 21% higher than a year ago. The number of single-family units in the construction pipeline is now falling and will continue to decline in the months ahead given recent declines in buyer traffic.

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eyeonhousing.org

NAHB builder confidence survey drops into contraction | Chappaqua Real Estate

NAHB chief economist says Fed policy & high construction costs will cause first decline in housing starts since 2011.

KEY TAKEAWAYS

  • For the first time since May 2020, the monthly NAHB/Wells Fargo Housing Index fell below the break-even measure of 50.
  • Roughly one-in-five (19%) home builders in the HMI survey reported reducing prices in the past month to increase sales or limit cancellations,.
  • Meanwhile, 69% of builders reported higher mortgage interest rates as the reason behind falling housing demand.

Builder confidence is sinking like a stone, in part the result of what an economist for the National Association of Home Builders (NAHB) now calls a “housing recession.”

NAHB today released the results of its monthly survey of home builders, which found that builder confidence in the market for newly built single-family homes fell for the eighth straight month in August, amid continuing supply-chain problems, high materials prices, and falling home affordability.

In fact, for the first time since May 2020, the monthly NAHB/Well Fargo Housing Index fell below the break-even measure of 50, declining six points to 49, the NAHB said.

“Tighter monetary policy from the Federal Reserve and persistently elevated construction costs have brought on a housing recession,” said NAHB Chief Economist Robert Dietz. “The total volume of single-family starts will post a decline in 2022, the first such decrease since 2011.”

Dietz noted, however, that “as signs grow that the rate of inflation is near peaking, long-term interest rates have stabilized, which will provide some stability for the demand-side of the market in the coming months.”

The latest report on inflation, released last week, showed that the Consumer Price Index in July was unchanged from June, and had dipped to 8.5% year over year from 9.1% in June.

NAHB Chairman Jerry Konter, a home builder and developer from Savannah, Ga., said the survey shows ongoing increases in construction costs and mortgage rates continue to weaken market sentiment for single-family home builders. “And in a troubling sign that consumers are now sitting on the sidelines due to higher housing costs, the August buyer traffic number in our builder survey was 32, the lowest level since April 2014 with the exception of the spring of 2020, when the pandemic first hit.”

Roughly one-in-five (19%) home builders in the HMI survey reported reducing prices in the past month to increase sales or limit cancellations, the NAHB said. The median price reduction was 5% for those reporting using such incentives. Meanwhile, 69% of builders reported higher mortgage interest rates as the reason behind falling housing demand, the top impact cited in the survey.

All three HMI components posted declines in August, with each falling to their lowest level since May 2020. Current sales conditions dropped seven points to 57; sales expectations in the next six months declined two points to 47; and traffic of prospective buyers fell five points to 32.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell nine points to 56, the Midwest dropped three points to 49, the South fell seven points to 63, and the West posted an 11-point decline to 51.

Derived from a monthly survey that NAHB has conducted for more than 35 years, the HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index, for which any number over 50 indicates that more builders view conditions as good than poor.

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gageprofessional.com

Housing price appreciation slows in June | Amonk Real Estate

Rising mortgage rates and inflation in the wider economy caused housing demand to drop sharply in June, forcing home prices to cool down.

Home prices are still higher than they were a year ago, but the gains slowed at the fastest pace on record in June, according to Black Knight, a mortgage software, data and analytics firm that began tracking this metric in the early 1970s. The annual rate of price appreciation fell two percentage points from 19.3% to 17.3%.

Price gains are still strong because of an imbalance between supply and demand. The housing market has had a severe shortage for years. Strong demand during the coronavirus pandemic exacerbated it.

Even when home prices crashed dramatically during the recession of 2007-09, the strongest single-month slowdown was 1.19 percentage points. Prices are not expected to fall nationally, given a stronger overall housing market, but higher mortgage rates are certainly taking their toll.

The average rate on the 30-year fixed mortgage crossed over 6% in June, according to Mortgage News Daily. It has since dropped back in the lower 5% range, but that is still significantly higher than the 3% range rates were in at the start of this year.

“The slowdown was broad-based among the top 50 markets at the metro level, with some areas experiencing even more pronounced cooling,” said Ben Graboske, president of Black Knight Data & Analytics. “In fact, 25% of major U.S. markets saw growth slow by three percentage points in June, with four decelerating by four or more points in that month alone.”

Still, while this was the sharpest cooling on record nationally, the market would have to see six more months of this kind of deceleration for price growth to return to long-run averages, according to Graboske. He calculates that it takes about five months for interest rate impacts to be fully reflected in home prices.

Markets seeing the sharpest drops are those that previously had the highest prices in the nation. Average home values in San Jose, California, have fallen 5.1% in the last two months, the biggest drop of any of the top markets. That chopped $75,000 off the price.

In Seattle, prices are down 3.8% in the past two months, or a $30,000 reduction. San Francisco, San Diego and Denver round out the top five markets with the biggest price reductions.

The cooling in prices coincides with a sharp jump in the supply of homes for sale, up 22% over the last two months, according to Black Knight. Inventory is still, however, 54% lower than 2017-19 levels.

“With a national shortage of more than 700,000 listings, it would take more than a year of such record increases for inventory levels to fully normalize,” said Graboske.

Price drops will not affect the average homeowner as much as they did during the Great Recession, because homeowners today have considerably more equity. Tight underwriting, and several years of strong price appreciation caused home equity levels to hit record highs.

Despite that, the strong demand in the market recently could present a problem for some. About 10% of mortgaged properties were purchased in the last year, so price drops could cause some borrowers to edge much lower in their equity positions.

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cnbc.com

Pending home sales down 20% | North Salem Real Estate

Pending home sales decreased in June, following a slight increase in May, according to the National Association of REALTORS®. All four major regions posted month-over-month and year-over-year pullbacks, the largest of which occurred in the West.

The Pending Home Sales Index (PHSI),* www.nar.realtor/pending-home-sales, a forward-looking indicator of home sales based on contract signings, dipped 8.6% to 91.0 in June. Year-over-year, transactions shrank 20.0%. An index of 100 is equal to the level of contract activity in 2001.

“Contract signings to buy a home will keep tumbling down as long as mortgage rates keep climbing, as has happened this year to date,” said 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.”

According to NAR, buying a home in June was about 80% more expensive than in June 2019. Nearly a quarter of buyers who purchased a home three years ago would be unable to do so now because they no longer earn the qualifying income to buy a median-priced home today.

“Home sales will be down by 13% in 2022, according to our latest projection,” Yun added. “With mortgage rates expected to stabilize near 6% and steady job creation, home sales should start to rise by early 2023.”

June Pending Home Sales Regional Breakdown

The Northeast PHSI slid 6.7% compared to last month to 80.9, down 17.6% from June 2021. The Midwest index dropped 3.8% to 93.7 in June, a 13.4% decline from a year ago.

The South PHSI slipped 8.9% to 108.3 in June, a decrease of 19.2% from the previous year. The West index slumped 15.9% in June to 68.7, down 30.9% from June 2021.

The National Association of REALTORS® is America’s largest trade association, representing more than 1.5 million members involved in all aspects of the residential and commercial real estate industries.

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*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

Pending contracts are good early indicators of upcoming sales closings. However, the amount of time between pending contracts and completed sales is not identical for all home sales. Variations in the length of the process from pending contract to closed sale can be caused by issues such as buyer difficulties with obtaining mortgage financing, home inspection problems, or appraisal issues.

The index is based on a sample that covers about 40% of multiple listing service data each month. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.NOTE: Existing-Home Sales for July will be reported on August 18. The next Pending Home Sales Index will be on August 24. All release times are 10 a.m. Eastern.

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