Home sales fell nearly 6% in July as the housing market slipped into recession

Sales of previously owned homes fell nearly 6% in July compared to June, according to a monthly report from the National Association of Realtors.

The group added that the number of sales decreased to a seasonally adjusted annual rate of 4.81 million units. It’s the slowest pace of sales since November 2015, except for a short drop at the beginning covid pandemic.

Sales are down about 20% from the same month a year ago.

“In terms of the economic impact we are definitely in a recession in the housing sector because of Builders do not buildsaid Lawrence Yun, chief economist at Realtors. “However, are homeowners in a recession? Of course not. Homeowners are still financially comfortable.”

July sales numbers are based on closings, so contracts are likely to be signed in May and June. Mortgage rates soared in June, with the average 30-year fixed loan rate exceeding 6%, according to daily mortgage news. Then settled back into the 5% high range. That rate started around 3% this year, so the hit to affordability in June was tough, especially with inflation soaring.

Homebuyers are still dealing with a short supply. There were 1.31 million homes for sale at the end of July, unchanged from July 2021. At the current sales pace, that represents a 3.3-month supply.

While demand falls due to poor affordability, prices remain stubbornly high. The median home price sold in July was $403,800, an increase of 10.8% year over year. However, price gains are now tapering off, as this is the smallest annual rise since July 2020.

“The median home sales price has continued to climb, but at a slower pace for the fifth consecutive month, highlighting how the downward slope of buyer demand has returned the housing market to a more normal pace of activity,” said Danielle Hill, chief economist. at Realtor.com. “A look at active inventory trends shows that home listings were twice as likely as price cuts in July 2022 than last year.”

Sales activity continues to be stronger at the higher end of the market, although that is also fading quickly. There are simply more supplies available at the higher levels. Sales of homes between $100,000 and $250,000 were 31% lower than the previous year, while sales of homes between $750,000 and $1 million were down 8 percent. Sales of homes over $1 million are down 13% from a year ago.

First-time buyers account for only 29% of buyers in July. Historically, they usually make up about 40% of sales, but they clearly struggle the most in terms of affordability. Higher rents make it difficult for them to save for a down payment.

Even with slowing sales, this market is still fast-moving. A model home was contracted in July in just 14 days, the fastest recorded in June. A year ago, it was 17 days. Yun called it “unusual”.