Home sales decline as homeowners cling to lower mortgage rates.
Sales of Existing Homes Decline in June
Sales of existing homes took a hit in June, experiencing an 18.9% decline compared to the previous year. According to a report by the National Association of Realtors, existing home sales fell by 3.3% in June, reaching a seasonally adjusted annual rate of 4.16 million.
The total housing inventory at the end of June stood at 1.08 million units, remaining relatively unchanged from May but down 13.6% from the previous year.
The median price of an existing home in June was $410,200. Additionally, homes typically stayed on the market for 18 days in June, the same as May but up from 14 days in June 2022.
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These figures come at a time when mortgage rates are on the rise, reaching levels not seen since November. The Federal Reserve is expected to raise its interest rate target later this month, with a projected range of 5.25% to 5.50%.
According to Freddie Mac, the average rate for a 30-year fixed-rate mortgage now stands at 6.96%, up from 6.67% just a month ago. The average rate for a 15-year fixed-rate mortgage has also increased to 6.3%.
Meanwhile, there is surprising news in the new home sales sector. The Census Bureau reports that new home sales in May rose by 12.2% to a seasonally adjusted annual rate of 763,000, surpassing expectations.
The surge in mortgage rates has led existing homeowners, who locked in historically low rates before 2022, to hold back from selling. This has resulted in a decrease in existing home inventory, making new homes a highly sought-after commodity.
Furthermore, the housing market’s complexity is evident as housing starts declined in June. Housing starts measure the change in the number of new residential buildings that began construction. From May to June, starts fell by 8%, reaching a seasonally adjusted annual rate of 1.43 million. Compared to May 2022, there was an 8.1% decrease.
On a positive note, recent reports indicate that inflation is decreasing at a faster rate than anticipated, raising hopes that the economy will avoid a recession as the Federal Reserve works to curb price growth. Additionally, the unemployment rate remains historically low at 3.7%, indicating that the rate hikes have not caused significant damage to the labor market.
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