Previously owned home sales fell 5.9% in July compared to June, and 20% from one year ago, entering the U.S housing markets into an official recession, according to Lawrence Yun, chief economist for the National Association of Realtors.
The sales count decreased to a seasonally adjusted yearly pace of 4.81 million units, the association reported. Since November 2015, with the exception of a temporary decline during the start of the Covid-19 pandemic, the sales pace has been at its lowest point.
"We're witnessing a housing recession in terms of declining home sales and home building," Yun said.
Meanwhile, home prices are still expensive.
"However, it's not a recession in home prices," Yun added. "Inventory remains tight and prices continue to rise nationally with nearly 40% of homes still commanding the full list price."
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At the end of July, there were 1.31 million houses up for sale, which is the same as July 2021. That equates to a 3.3-month supply at the current sales rate.
Prices remain high while demand drops off as a result of decreased affordability. The median cost of a home sold in July was $403,800, up 10.8% from the same month in 2021. However, given that this is the smallest yearly increase since July 2020, price increases are now beginning to moderate.
"The ongoing sales decline reflects the impact of the mortgage rate peak of 6% in early June," said Yun. "Home sales may soon stabilize since mortgage rates have fallen to near 5%, thereby giving an additional boost of purchasing power to home buyers."
New home buyers were responsible for 29% of homes that remained on the market for 14 days in July. Second time, or individual investors, contributed 14% to all homes purchased in July. Some 82% of all homes purchased in July were on the market for less than four weeks.
According to Freddie Mac, the average 30-year fixed rate averaged 5.41% in July, up from the 2.96% rates in 2021.
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