In the housing market, the concept of “home sellers are buyers” reveals that rising prices and mortgage rates discourage selling, affecting home purchases. This trend is evident in the latest report by the National Association of Realtors, showing a continued decline in existing home sales, approaching levels of early 2021.
Rising prices coupled with deficient demand illustrate the housing market’s dire state. Unlike prior cycles, the current market’s distinct features, discussed with CNBC, have led to this unique scenario of prolonged low demand, in contrast to last year’s sales plummet.
In July, existing-home sales fell by 2.2% to a seasonally adjusted annual rate of 4.07 million, marking a 16.6% YoY decrease from July 2022. According to NAR’s Chief Economist Lawrence Yun, the decline is driven by limited inventory and unfavorable mortgage rates, unfavorably affecting buyers.
In February, as mortgage rates slid from 7.37% to 5.99%, positive purchase data led existing home sales to spike from 4M to 4.5M. Yet, sales stagnate now due to high mortgage rates and home prices impeding growth.
Examining the buyer profile and days on the market, the year-over-year increase is favorable for housing, although not meeting preferences. Understanding that market days are seasonal, attention should focus on year-over-year changes rather than seasonal fluctuations.
Despite a substantial annual sales decline, NAR-recorded inventory remains historically low. Sellers often intend to buy, explaining low listings as they list homes while eligible for current rates. Typically at 2-2.5 million, active listings now total 1.11 million.
Recent existing home sales data indicates a slowdown, predating rising mortgage rates. Unlike 2022, sales aren’t plummeting, yet ongoing negative year-over-year inventory persists. This housing cycle significantly differs from previous decades. With a 30-year mortgage and affordable housing costs, homes offer inflation and Federal Reserve protection. The absence of sellers as buyers hampers existing home sales demand.
