Existing home sales fall as owners hold on to lower mortgage rates
Zachary Halaschak
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Sales of existing homes declined in June, down 18.9% from the year before.
Existing home sales fell by 3.3% in June to a seasonally adjusted annual rate of 4.16 million, according to a report by the National Association of Realtors released Thursday.
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Total housing inventory at the end of June was 1.08 million units, about the same as May and down 13.6% from a year ago.
The median price of an existing home in June was $410,200. Additionally, homes typically remained on the market for 18 days in June, the same as in May but up from 14 days in June 2022.
“The first half of the year was a downer for sure with sales lower by 23%,” NAR chief economist Lawrence Yun said. “Fewer Americans were on the move despite the usual life-changing circumstances. The pent-up demand will surely be realized soon, especially if mortgage rates and inventory move favorably.”
The news comes as mortgage rates rise to levels not seen since November, with the Federal Reserve almost certainly set to raise its interest rate target again later this month to a target range of 5.25% to 5.50%.
The rate on the average 30-year fixed-rate mortgage is now at 6.96%, up from 6.67% about a month ago, according to Freddie Mac. The rate on the average 15-year fixed-rate mortgage has ticked up to 6.3%.
Meanwhile, new home sales surprised economists in the latest report. New home sales in May rose 12.2% to a seasonally adjusted annual rate of 763,000, according to the Census Bureau, far above the number expected by forecasters.
Because mortgage rates have surged so much, owners of existing homes who have mortgages with rates locked in before 2022 are shying away from selling because they want to keep their historically low rates. That means less existing home inventory on the market, making new homes more of a hot commodity.
This week, it was revealed that the number of housing starts declined in June, something that shows how complicated the overall housing picture is at the moment.
“The Fed’s rate hikes aren’t cooling existing home sales, it is the fact there aren’t any homes for buyers to purchase as the baby boom sits tight and are failing to retire and downsize like previous generations did,” said Chris Rupkey, chief economist at FWDBONDS. “It doesn’t help that mortgage rates were 3% before the Fed started jacking up interest rates and are around 7% today, so moving house would engender new mortgages and a financial cost that is too expensive to bear.”
Housing starts measure the change in the number of new residential buildings that began construction. Starts fell 8% from May to June. They are now at a seasonally adjusted annual rate of 1.43 million. From May 2022, they fell 8.1%.
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Meanwhile, there has been some recent good news for the macroeconomy. Two separate reports last week showed inflation is falling faster than economists had expected, raising hopes the economy will avoid falling into a recession as the Fed works to slow price growth.
The unemployment rate has also remained historically low at 3.7%, indicating the rate hikes have not resulted in severe damage to the labor market.