There was a tiny bounce in existing-home sales in May and a big bounce in February. Otherwise, it has been all downhill since February of 2022.
The National Association of Realtors® NAR® reports Existing-Home Sales Retreated 3.3% in June.
Existing-Home Sales Highlights
- Existing-home sales dropped 3.3% in June to a seasonally adjusted annual rate of 4.16 million. Sales trailed off by 18.9% from one year ago.
- At $410,200, the median existing-home sales price for June was the second-highest price ever recorded – since January 1999 when NAR began tracking the data – and 0.9% less than the all-time high from one year ago of $413,800. It was the third time the monthly median sales price eclipsed $400,000, joining June 2022 and May 2022 ($408,600).
- At 1.08 million at the end of June, the inventory of unsold existing homes was unchanged from the previous month, or the equivalent of 3.1 months’ supply at the current monthly sales pace.
- First-time buyers were responsible for 27% of sales in June, down from 28% in May and 30% in June 2022. NAR’s 2022 Profile of Home Buyers and Sellers – released in November 2022 – found that the annual share of first-time buyers was 26%, the lowest since NAR began tracking the data.
- All-cash sales accounted for 26% of transactions in June, up from 25% in both May 2023 and June 2022.
Existing Home Sales Seasonally Adjusted
Existing-Home Sales Month’s Supply
Existing Home Sales Long Term
Transaction Crash
Existing home sales have crashed to a level seen in the mid 1990s. Prices have not crashed but transactions have.
People who want to move are effectively trapped in their houses because they do not want to trade a sub-3% mortgage for a 7.0% mortgage.
The bidding wars we do see are from people who are price insensitive. They make for amusing anecdotes but the above chart shows the real picture.
This crash is likely to last longer because intertest rates are likely to stay higher for longer because the Fed fears stoking more inflation.
Home sales mean appliance sales, new furniture, cabinets, new carpet, landscaping, etc. Who doesn’t spend a lot more money when they move into a new home?
Financial Stress
Note that 70 Percent of Americans are Financially Stressed, 58 Percent Live Paycheck to Paycheck
The naïve view is that housing cannot crash unless prices crash.
The reality is transactions have crashed, and weak home sales portend a weak economy for a long time.
For further discussion, please see The Starter Home Is No More, Even in Second Tier Markets
Us fiscal deficit is now 7% of gdp, really high. The increase is driven by much higher interest payments that will continue rising as low rate maturing debt is replaced by much higher rates, meaning income is rapidly rising among bond holders, mostly wealthier households.
This means the wealthy can continue to purchase expensive homes while those of more limited means are priced out of the market. I expect high priced homes to be ok while lower priced ones fall, a bifurcated market. Rising avg prices and falling sales might provide some evidence of this theory.
Anecdotal, but inventory is zero in a market I’m watching.
Housing is primed for a massive run-up due to pent up demand. The moment it looks like rates will begin coming down there will will a mad rush to buy. Just look at the single family housing start numbers, they are so low compared to the population there simply isn’t enough supply coming online and this has been the case now for fifteen years.
I expect single family housing to easily double in price over the next ten years. People will spend everything they can to own a single family home because they are luxury goods that greatly improve quality of life. Rental units are practically never comparable.
Where’s the money going to come from? The only way prices will double is if there’s rampant widespread inflation. In that scenario, everything will go up a lot.
Single family housing tends to melt up 6 – 10% a year in areas with good jobs, and more like 20-25% during peak demand years. That compound growth will lead to Bay Area style housing prices across all major metropolitan areas in the US. We saw home prices melt up beginning in ~2010 for a decade, and then absolutely rocket up beginning in 2020. They’ve only slightly leveled off despite mortgage rates making homes unaffordable to people who don’t have an existing home to sell.
Both higher earner household income and asset valuations are increasing. The West coast is full of 800K / year households. Housing is also increasingly becoming a token, where existing owners exchange their previous purchases for a different home. The average person is being priced out of ownership.
I think there are significantly fewer 800k households than there were last year… We’re getting flooded with resumes from people laid off by google and Facebook, and these are for jobs that will start at 150k at best.
We did hire one, and while she’s really smart, she doesn’t seem to have a knack for making things that can actually be useful. It’s weird having to babysit someone that probably has 20 IQ points on me.
That was only possible with the FED greatly expanding their balance sheet and having absurdly low rates. Something they likely can’t repeat. Once again, I ask where will the money come from?
the zero key on the FED RES of NY, currency conjuring desktop. when their owners, jpm and c, etc need bailouts………..to buy up regional banks when CRE crash bankrupts them. would be my guess. go study some banana republics. or better yet, go live through it. i saw in russia in 1998 to 1999 a 500% inflation on currency there. men were selling their military uniforms and medals on streets, and professionals were offering all forms of prostitution…………….amerikans have no clue as we haven’t had much implosions since us civil war.
good analysis. homes and pricing and volume resemble penny stocks before the insider paper becomes free trading. i’d bet the future for pricing will get adjusted down over the next 5 to 10 years…………the beauty of r/e trading is it is so slow. has been wonderful for men with patience. trading r/e is multi decades endeavor. now back to naps and trading equities and FX
The FED mismanages risk premiums/price signals. R-star is fictitious. The FED’s artificial manipulation of interest rates as its monetary transmission mechanism has hammered the real rate of interest, while shrinking credit spreads, and has unnecessarily stoked asset prices (where housing prices are a principal target).
Contrary to its mandate, the FED directly affects specific real-estate prices by buying and selling MBS.
Weird how new homes are moving while existing aren’t. I would guess new home buyers tend to be first time home buyers more than existing, so they aren’t giving up a low interest rate mortgage.
It’s not weird at all, builders are offering rate buy down incentives.
I posted the reasons yesterday. Homebuilders don’t have to trade low rate mortgage for a higher rate one. Homebuilders are offering mortgage rate buydowns. And Homebuilders are more willing to drop the price to sell the house. As a result income is going up, but profit margins are shrinking. Fearing demand drying up, homebuilders have applied for fewer permits.
As a buyer, I could care less about sales. Home prices remain incredibly resilient and very high. In my market, homes fly off the shelf with multiple offers. It is insane with the 30 yr at 7%. Lots of all cash buyers and investors. Prices have actually been going back up higher since JAN 2023. And no, this is not just seasonal IMO.
Where is the average person getting all this money from (plus closing and moving costs) …. I read that in the NYC area both sales and prices are skyrocketing as well
The only thing people care about is price, not sales volume. Prices are holding up pretty well, because no one wants to sell. Even if AirBnB unloads a million homes on the market, still not enough to move the needle.
Huntsville update: town hasn’t slowed down a bit. Still a construction and relocation boomtown.
Just because people refuse or can’t sell their homes at a discount, does it mean they haven’t depreciated?