Housing market records sharpest decline in sales in almost two decades: report
Sales dropped 5.9% from June to July and dropped 20.2% compared to last year
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New data indicates that the housing market is seeing its most severe drop in almost two decades as home sales hit their lowest level in seven years.
Existing Home Sales data showed a drop of 5.9% from June to July and a 20.2% drop from the same period one year earlier, marking the sixth consecutive month of decline. The median price of a house rose 10.8% from one year prior to a price of $403,800, but it’s still down $10,000 from the previous month’s high, according to the National Association of Realtors.
These drops occurred despite the inventory of unsold houses rising to 1.31 million by the end of July.
"The ongoing sales decline reflects the impact of the mortgage rate peak of 6% in early June," said NAR Chief Economist Lawrence 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."
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"We're witnessing a housing recession in terms of declining home sales and home building," Yun added. "However, it's not a recession in home prices. Inventory remains tight and prices continue to rise nationally with nearly 40% of homes still commanding the full list price."
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The rise in mortgage rates has helped to rapidly cool what had been a red-hot housing market, hitting a record high in median home prices. The Federal Reserve boosted the rate in an effort to contain rampant inflation.
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The six-month decline marks perhaps the fastest drop off since 2005, according to Seeking Alpha.
The average seasonally adjusted rate of home sales over the past decade hovered around 5.35 million, but the current level is at around 4.81 million, down from 6.50 million in half a year. Only the first year of the pandemic shows a more severe decline in home sales.
A For Sale sign is posted in front of a property in Monterey Park, California on August 16, 2022. - The US housing market is declining amid higher interest rates with fewer starts and more cancelled deals. (Photo by FREDERIC J. BROWN/AFP via Getty Images / Getty Images)
The previous non-pandemic rate to hit a similar cliff dive occurred in 2005 after the housing bubble peaked. The following decline occurred over nine months from 2006 into 2007 and rolled into the housing crisis of 2008.
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And the Conference Board posted an annual rate of change in its Leading Economic Index of 0%. Seeking Alpha noted that should the rate enter negative territory, it would be the 13th time since 1960, and 66% of those previous instances preceded a recession.
FOX Business' Megan Henney contributed to this report