New data indicates the housing market is seeing its steepest decline in nearly two decades as home sales hit their lowest level in seven years.
Existing data on home sales showed a 5.9% decline from June to July and a 20.2% decline from the same period a year earlier, marking the sixth consecutive month of decline. The median home price rose 10.8% from a year earlier, to a price of $403,800, but it’s still $10,000 lower than the previous month’s high, according to the National Association of Realtors.
These declines occurred despite the stock of unsold homes rising to 1.31 million at the end of July.
“The continued revenue decline reflects the impact of the 6% mortgage spike in early June,” said NAR Chief Economist Lawrence Yun. “Home sales may soon stabilize as mortgage rates have fallen to nearly 5%, giving home buyers an extra boost.”
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“We are witnessing a housing recession in terms of declining home sales and housing construction,” Yun added. “It’s not a recession in home prices, though. Inventory remains tight and prices continue to rise nationally, with nearly 40% of homes still serving full list price.”
The rise in mortgage rates has contributed to a rapid cooling of what had been a red-hot housing market, with median house prices hitting record highs. The Federal Reserve raised interest rates in an effort to contain rampant inflation.
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The six-month decline may mark the fastest decline since 2005, according to Seeking Alpha.
The average seasonally adjusted home sales percentage over the past decade has hovered around 5.35 million, but the current level is around 4.81 million, down from 6.50 million in six months. Only the first year of the pandemic shows a sharper decline in home sales.
The previous non-pandemic rate of achieving a similar cliff dive occurred in 2005 after the housing bubble peaked. The next decline occurred over nine months from 2006 to 2007 and continued into the housing crisis of 2008.
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And the Conference Board recorded an annual rate of change in its Leading Economic Index of 0%. Seeking Alpha noted that if interest rates went negative, it would be the 13th time since 1960, and 66% of those previous cases preceded a recession.
Megan Henney of FOX Business contributed to this report
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