New data indicates the housing market is experiencing its biggest decline in nearly two decades as home sales hit their lowest level in seven years.
Data on existing home sales showed a 5.9% drop from June to July and a 20.2% drop from the same period a year earlier, marking the sixth consecutive month of decline. The median price of a home is up 10.8% from a year before a price of $403,800, but is still down $10,000 from the previous month’s peak, according to the National Association of Realtors.
These declines occurred despite the inventory of unsold homes which stood at 1.31 million at the end of July.
“The continued decline in sales reflects the impact of mortgage rates peaking at 6% in early June,” said NAR chief economist Lawrence Yun. “Home sales may soon stabilize as mortgage rates have fallen to nearly 5%, providing an additional boost to homebuyers’ purchasing power.
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“We are witnessing a real estate recession in terms of declining sales and home construction,” Yun added. “However, this is not a house price recession. Inventory remains tight and prices continue to rise nationally, with nearly 40% of homes still showing the full list price.”
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Rising mortgage rates helped cool what had been a hot housing market quickly, pushing median house prices to a record high. The Federal Reserve raised the rate in an effort to contain runaway inflation.
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The six-month decline marks perhaps the fastest drop since 2005, according to Seeking Alpha.
The seasonally adjusted average rate of home sales 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 more severe decline in home sales.
The previous non-pandemic rate to reach a similar plunge occurred in 2005 after the peak of the housing bubble. The next drop occurred over nine months from 2006 to 2007 and led to the housing crisis of 2008.
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And the Conference Board posted an annual rate of change of 0% in its leading economic index. Seeking Alpha noted that if the rate entered 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