Sales of existing homes have fallen for a seventh straight month and are now at the lowest level since early in the pandemic.
Existing-home sales tumbled by 0.4% in August to a seasonally adjusted annual rate of 4.8 million, according to a report by the National Association of Realtors released Wednesday. Sales were down nearly 20% from a year ago.
LATEST NUMBERS COMPLICATE PICTURE OF HOUSING RECESSION
The NAR said the median existing-home sales price declined from the previous month to $389,500 but is still up 7.7% for the 12 months ending in August. The hike marks 126 consecutive months of year-over-year price increases, the longest recorded streak.
“The housing sector is the most sensitive to and experiences the most immediate impacts from the Federal Reserve’s interest rate policy changes,” said Lawrence Yun, NAR chief economist. “The softness in home sales reflects this year’s escalating mortgage rates. Nonetheless, homeowners are doing well with near nonexistent distressed property sales and home prices still higher than a year ago.”
Mortgage rates rose quickly over the past few months as the Federal Reserve conducted aggressive interest rate hikes to curb inflation. In fact, last week mortgage rates ballooned to over 6% for the first time since the Great Recession, according to Freddie Mac.
As of Tuesday, the average 30-year fixed-rate mortgage was 6.02%, up more than 3.1 percentage points from a year before, according to Freddie Mac. The average 15-year fixed-rate mortgage popped to 5.21%.
The Fed is expected to conduct another massive interest rate hike on Wednesday. Most investors are expecting it to be another big 75-basis-point hike, but a small minority predicts the Fed could go even bolder and raise rates by a whopping 100 basis points — equivalent to a full percentage point increase.
Also this week, permits for future homebuilding dropped to a seasonally adjusted annual rate of 1.517 million, the lowest since just after the pandemic struck more than two years ago. Total building permits, a proxy for future construction, fell 10% in August.
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On the other hand, total housing starts beat forecasts and increased 12.2% to a 1.575 million unit seasonally adjusted annual rate during August, according to a report out on Tuesday. Housing starts measure the annualized change in the number of new residential buildings that began construction.
Still, the negative signs in the housing market are raising concerns that a recession is on the horizon or has even already arrived. Housing is a major part of the economy, so the negative news doesn’t bode well for the country’s overall economic position.
