But those sell-offs took place during the “Fed pivot” fantasy that drove mortgage rates down to 5%. Today, mortgage rates are around 6.5%.
By Wolf Richter for WOLF STREET.
In July and through mid-August, mortgage rates fell from the 6% range in mid-June, on the widely propagated fantasy of a Fed “pivot” on rate hikes. By mid-August, the average 30-year fixed mortgage rate had fallen to 5%. Yesterday they were at 6.47%. But the brief interlude of lower mortgage rates slowed the decline in home sales – sales fell again in August compared to July but at a slower pace – with real estate agents in mid-August announcing that the market was waking up.
But prices fell for the second month in a row, and in a big way, amid widespread price declines, and that also helped close some deals.
The median price existing single-family homes, condos and co-ops whose sales closed in August fell 3.5% in August from July, the largest month-over-month percentage decline since January 2016, after down 2.4% the previous month, to $389,500, according to the National Association of Realtors. Although there is some seasonality involved, the percentage decline was much larger than normal in August, reducing the year-over-year price increase to 7.7%, down from to 25% year-over-year increases last summer (data via YCharts):
In the West, prices are falling are even further along, amid dismal sales. For instance, in San Francisco and Silicon Valley, median prices have plunged in recent months — now down year-over-year in San Francisco and Santa Clara County (San Jose) and up a hair in San Mateo County, according to data from the California Association of Realtors.
Sales existing homes, condos and co-ops across the U.S. fell a little in July, following the previous month’s 5.9% plunge, to a seasonally adjusted annual sales rate of 4.80 million homes, to roughly on par with the June 2020 foreclosure, according to the National Association of Realtors in its report. This is the seventh straight month of month-over-month declines.
Beyond the months of confinement, this is the lowest rate of sales since 2014, and down 29% compared to October 2020 (historical data via Y-Charts):
Sales of single-family homes fell 0.9% in August from July, and 19% year over year, to a seasonally adjusted annual rate of 4.28 million homes.
Condo and co-op sales rose 4% from July to 520,000 seasonally adjusted annual rate, down 25% year-over-year.
Compared to August of last year, sales fell 20%, the 13th consecutive month of year-over-year declines, based on the seasonally adjusted annual rate of sales (historical data via YCharts ):
Sales by region: Year-on-year, sales fell sharply in all regions. Month over month (mom), you can see a slight increase in two of the four regions:
- Northeast: +1.6% mom; -13.7% YoY.
- Midwest: -3.3% mom; -15.9% YoY.
- South: 0% mom; -19.3% YoY.
- West: +1.1% mom; -29.0% YoY.
Sales fell across all price ranges, but fell the most at the low end.
Sales volume has been weak because potential sellers cling to their stretch prices of yesteryear, when mortgage rates were 3%, and many would rather keep the home off the market or take it off the market than sell cheaper, as long as they can. But price cuts have now taken off among sellers who want to sell.
Price reductions began to soar in May from record highs last winter and spring as sales stagnated and mortgage rates rose. In July, they hit their highest level since 2019, according to data from real estate agent.com. In August, price cuts eased slightly, as sellers might have felt price cuts were less necessary, amid the fantasy of mortgage rate cuts and the Fed’s pivot in July and August:
Active announcements – total inventory for sale minus properties awaiting sale – rose to 779,400 homes in August, the highest since October 2020, up 27% from a year ago, according to data from realtor .com:
The National Association of Realtors calls for the construction of more single-family homes. But the home builders, they or they find it difficult to sell the houses they have already built or are in the process of building, sales fell, inventories hit their highest level since 2008and homebuilders began slashing prices, cutting mortgage rates and piling on other incentives to move their inventory.
Investors or buyers of second homes bought 16% of homes in August, down from 14% in July, but down from the 17% to 22% range in spring and winter, according to NAR data.
All-cash buyerswhich include many investors and buyers of second homes, remained at 24% of total sales, down from a 25% share to 26% from April to June.
Looking Ahead: Holy-Moly Mortgage Rates. After the fantastic drop from 6% in mid-June to 5% in 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 Mortgage News Daily.
According to Freddie Mac’s weekly measure, released last week, based on mortgage rates from the start of last week, they rose to 6.02%, more than double from a year ago. Those mortgage rates above 6% are still very low, given that CPI inflation is above 8%. But they are catching up.
And would-be sellers who clung to their homes in July and August because they didn’t want to price where buyers were – hoping that the “pivot” fantasy would drive mortgage rates even lower – are doing Now faced with the effects of those 6%-plus mortgage rates:
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