Housing bubble problems: Home prices are down 3.5%, the biggest monthly drop since January 2016. Sales, already at closing levels, fell even more. Active lists rise more

ive here. Wolf gives one of his regular updates to the housing market. His big message is “See below!”

Written by Wolf Richter, Wolf Street Editor. Originally Posted in Wolf Street

These sales occurred during the fiction of the “Federal Reserve pivot” that drove mortgage rates down to 5%. Now mortgage rates are close to 6.5%.

In July through mid-August, mortgage rates fell sharply from the 6% rate in mid-June, on the back of widespread fantasy about the Fed’s “pivot” of raising interest rates. By mid-August, the average 30-year fixed-rate mortgage rate had dropped to 5%. Yesterday, it was 6.47%. But the short break in mortgage rates is slower than the decline in home sales – sales fell again in August from July but at a slower rate – with brokers talking in mid-August about the market’s wake.

But prices have fallen for the second month in a row, and in a big way, amid widespread price cuts, that also helped seal some deals.

average price Of existing single-family homes, condominiums and co-ops that closed sales in August fell 3.5% in August compared to July, the largest month-to-month percentage drop since January 2016, after a 2.4% drop the previous month to $389,500, According to the National Association of Realtors. While there is some seasonality involved, the percentage decline was much larger than usual in August, reducing the year-over-year price increase to 7.7%, down from 25% year-over-year last summer (data via YCharts):

In the West, prices go down I advanced further, amid dismal sales. For example, in San Francisco and Silicon Valley, average prices have fallen in recent months — they’re now down year on year in San Francisco and Santa Clara County (San Jose) and only a hair higher in San Mateo County, according to California Association of Realtors data.

sales The number of existing homes, condos and co-ops across the United States declined slightly from July, after a 5.9% drop in the previous month, to a seasonally adjusted annual sales rate of 4.80 million homes, nearly a level with closings — June 2020, according to the National Association of Realtors. in its report. This was the seventh consecutive month of monthly declines.

After the closing months, it was the lowest sales rate since 2014, down 29% from October 2020 (historical data via YCharts):

Sales of single-family homes fell 0.9% in August compared to July, and 19% year-over-year, to the seasonally adjusted annual rate of 4.28 million homes.

Sales of apartments and co-ops are up 4% from July, to a seasonally adjusted 520,000 annual rate, down 25% year over year.

Compared to August last year, sales are down 20%, the 13th consecutive month of annual declines, based on seasonally adjusted annual sales (historical data via YCharts):

Sales by regionOn an annual basis, sales fell sharply in all regions. On a monthly basis (mom), you can notice a slight increase in two of the four areas:

  • Northeast: +1.6% illiterate; -13.7% YoY
  • Midwest: -3.3% um; -15.9% per year.
  • South: 0% illiterate; -19.3% on an annual basis.
  • West: +1.1% um; -29.0% on an annual basis.

Sales fell in all price ranges but fell further at the bottom line.

Sales have been low because potential sellers are sticking to their ambitious prices last year, when mortgage rates were 3%, and many would rather keep the home off the market or take it off the market rather than sell at a lower price, as long as they can. But price cuts are now initiated by sellers who want to sell.

Price cuts They started to rise in May from record lows last winter and spring as sales stalled and mortgage rates rose. In July, they reached their highest level since 2019, according to data from realtor.com. In August, rate cuts eased a bit as sellers may have felt there was less need for rate cuts, amid pivotal Federal Reserve mortgage rate declines in July and August:

Active Lists Total inventory for sale minus properties with pending sales rose to 779,400 homes in August, the highest level since October 2020, up 27% from a year ago, according to realtor.com data:

The National Association of Realtors is calling for more single-family homes to be built. But home builders, that they They’re having trouble selling homes they’ve already built or are building, sales are down, inventories are at their highest levels since 2008, and homebuilders are starting to cut prices, buy mortgage rates, and build up other incentives to move their inventory.

Investors or second home buyers 16% of homes bought in August, up from 14% in July, but below the 17%-22% range in spring and winter, according to NAR data.

Buyers “All the Money”which includes many investors and second home buyers, remained at 24% of total sales, down from a 25% share to 26% in April through June.

From now on: sacred mortgage rates. After dropping from 6% in mid-June to 5% by mid-August, mortgage rates are now well above 6%.

The daily measure of the average 30-year fixed mortgage rate is 6.47%, according to Daily Mortgage News.

According to the Freddie Mac Weekly Barometer, released last week, based on mortgage rates early last week, it rose to 6.02%, more than double a year ago. Mortgage rates above 6% are still very low, considering CPI inflation over 8%. But they are catching up.

And potential sellers who stuck to their homes in July and August because they didn’t want to meet the price as buyers – hoping that the “pivot” fantasy would lower mortgage rates even more – are now facing the effects of these 6% – plus mortgage rates:

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