US existing home sales slide again, but prices up from a year earlier (updated)

Applied Energetics

22/08/2023 17:48

(Adds context on new home sales, 2023 sales outlook, quotes in
paragraphs 11-12, 14, 16-19)
    By Safiyah Riddle
       Aug 22 (Reuters) - U.S. existing home sales dropped to a
six month-low in July as home owners who are locked into cheap
mortgages refrained from selling their properties with the cost
of new mortgages for another home at the highest levels in
decades.
    That limited inventory, however, helped drive prices higher
on a year-over-year basis for the first time since January.
    Existing home sales fell 2.2% in July to a seasonally
adjusted annual rate of 4.07 million units, the lowest level
since January, from an unrevised 4.16 million units in June, the
National Association of Realtors said on Tuesday. Economists
polled by Reuters had forecast home sales would be little
changed at 4.15 million units. 
    Sales fell in the Northeast, Midwest and South, but rose in
the West, where home prices have fallen most sharply in the past
year. All regions experienced annual sales declines.
    Home resales, which account for a big chunk of U.S. housing
sales, fell 16.6% on a year-on-year basis in July.
    Home prices have bottomed out after being pressured by the
Federal Reserve's aggressive interest rate hikes, but the
persistent shortage of properties for sale could limit any
rebound as many prospective buyers are forced out of the market.
    Mortgage rates have surged again recently to the highest
levels in decades, with the average rate on the popular 30-year
fixed-rate mortgage topping 7% in the latest week, according to
mortgage finance giant Freddie Mac.
    There were 1.11 million previously owned homes on the market
last month, up 3.7% from a month earlier but down 14.6% from
July 2022. At July's sales pace, it would take 3.3 months to
exhaust the current inventory of existing homes, up from 3.2
months a year ago.
    A four-to-seven-month supply is viewed as a healthy balance
between supply and demand. The median existing house price rose
1.9% from a year earlier to $406,700 in July, the fourth time it
has topped $400,000.
    "Two factors are driving current sales activity - inventory
availability and mortgage rates," said Lawrence Yun, the NAR's 
chief economist. "Unfortunately, both have been unfavorable to
buyers."
    
    'LOCK-IN EFFECT'
    The dearth of existing houses on the market has helped
bolster new home construction and sales in recent months. The
NAR predicted that total resales in 2023 will fall 12.9% from
2022, at the same time that total new home sales in 2023 will
increase by 12.3%.
        The Commerce Department will report new home sales data
for July on Wednesday. Economists polled by Reuters see a modest
uptick in transactions. New home sales have outperformed
existing home sales so far this year.
  
    Properties typically remained on the market for 20 days in
July, up from 14 days a year ago. Seventy-four percent of homes
sold in July were on the market for less than a month.
First-time buyers accounted for 30% of sales, up from 29% a year
ago.
    Sales fell the least for homes priced at more than $1
million as supply was less constrained relative to demand than
for lower-value homes, Yun said.
    All-cash sales accounted for 26% of transactions compared to
24% a year ago. Distressed sales, including foreclosures,
represented 1% of transactions, essentially unchanged from June
and the previous year.
    Yun said it was "anyone's guess" as to when mortgage rates
might begin easing, and some economists don't expect much relief
until 2024.
        "Forecasting mortgage rates in the near term is very
difficult, but it's our expectation that mortgage rates will
begin to normalize next year," said Matthew Walsh, an economist
at Moody's who focuses on the housing market.
    That could encourage some home owners to resell and look for
more new housing, he said, but it could be a while before
current rates can compete with the mortgages that the majority
of existing home owners secured before interest rates climbed.
    "We expect that lock-in-effect will remain for quite some
time," Walsh said.

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Graphic-U.S. existing home sales    https://tmsnrt.rs/3qLdeqI
Graphic-Housing stocks vs. the broader markets    https://tmsnrt.rs/3YKswsm
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 (Reporting by Safiyah Riddle; Editing by Paul Simao)
 ((Safiyah.riddle@thomsonreuters.com;))