Government officials have been loath to declare the country in a recession. In the housing market, however, some economists believe existing home sales are already there.
Existing home sales dropped for the sixth consecutive month in July, according to a report from the National Association of Realtors. The half-year streak marks the longest period of consecutive drops in eight years.
Home sales fell 5.9 percent from June to July, clocking in last month at a seasonally adjusted rate of 4.81 million. Year over year, sales declined 20.2 percent.
The drop in sales is being attributed in part to mortgage rates, which have been on the rise since the Federal Reserve first hiked interest rates earlier in the year. NAR’s chief economist Lawrence Yun said sales may stabilize as mortgage rates flatten below June’s 6 percent peak.
NAR chief economist Lawrence Yun (National Association of Realtors)
“We’re witnessing a housing recession in terms of declining home sales and home building,” Yun said in a release. “However, it’s not a recession in home prices.”
The median existing home price also dropped from the previous month, although it is up significantly from last year. The median price was $403,800 in July, down exactly $10,000 from June. It’s up 10.8 percent from last year, the 125th straight month of year-over-year gains.
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While existing sales across all four regions dropped in July, median home prices jumped across the board. Miami recorded the highest year-over-year median list price growth, up 36.2 percent year-over-year.
In addition to mortgage rates, lack of inventory is also driving sales down. At the end of July, there were 1.3 million housing units available, a 4.8 percent gain from June. But that’s still a relatively low 3.3-month supply of unsold inventory at the current sales pace, which is accelerating; properties were on the market for an average of 14 days last month, matching the lowest mark since NAR started keeping track in May 2011.
It’s not clear how homebuilders will to close the gap between supply and demand and prop up inventory, but they aren’t feeling good about the market. The National Association of Home Builders/Wells Fargo Housing Market Index dropped for the eighth straight month in August, falling below the breakeven mark for the first time in 27 months.
Housing starts dropped nearly 10 percent from June to July, according to the Commerce Department.