This summer has been tumultuous for homebuyers and home sellers as they navigated blistering inflation, higher mortgage interest rates, and record home prices. But, the latest existing housing sales report from the National Association of REALTORS suggests that the market may be headed toward stabilization.
Housing sales volume in July 2022 retreated 5.9% from the previous month and was 20.2% lower than in July 2021. Meanwhile, median home prices shrank from $413,800 in June to $403,800 in July, but prices were still 10.8% higher than a year ago in July 2021, marking 125 consecutive months of year-over-year price increases.
Among the reasons cited for the declines was mortgage interest rates that went above 6% in June, but have since fallen to nearly 5%. Compared to 2021 when the average commitment rate for a conventional 30-year fixed rate mortgage was 2.96%, consumers paid double that percentage (5.41%) for the same loan in July 2022.
Homes are staying on the market slightly longer – from 2.6 months of inventory on hand in July 2021 to 3.3 month’s supply in July 2022. Yet, housing sales are still brisk. Eighty-two percent of homes sold in July 2022 were on the market for less than a month.
Housing shortages still abound, which is why prices aren’t falling any more than they have. Exacerbating the shortage is a slowdown in new single-family home starts as home builders turn instead to multi-family projects.
If interest rates and home prices continue to drop, sales volume could heat up again.