U.S. Home-Sales Report for July Comes as Housing Market Cools
The National Association of Realtors’ July report on existing-home sales will cap a week of figures that so far have pointed to a slowdown in the housing market.
NAR will release July home-sales data at 10 a.m. ET Thursday.
The housing market has been rapidly losing steam as the Federal Reserve’s aggressive path of interest-rate increases pushes up the cost of taking out a mortgage. Fed officials have enacted two rate increases of three-quarters of a percentage point each in the past three months to cool inflation, which stood at 8.5% in July, down from 9.1% in June.
Mortgage rates have risen in response. Last week, the 30-year fixed-rate mortgage rose to 5.22% according to housing-finance agency
Sellers in many markets are cutting list prices, but prices are still up significantly from year-ago levels. The median sales price of an existing home rose 13% in June from a year earlier to a record $416,000, according to NAR. July’s data release could show another price increase.
Economists polled by The Wall Street Journal estimate sales of existing homes fell for a sixth straight month in July as high interest rates and a shortage of homes for sale kept prices high and locked buyers out of the market.
Other indicators also point to a housing market that is grinding down.
A measure of U.S. home-builder confidence fell for the eighth straight month in August to the lowest level since May 2020, the National Association of Home Builders said this week. About one-fifth of builders surveyed said they had reduced prices in the past month, NAHB said.
Mortgage applications fell 2.3% last week from the preceding week, the Mortgage Bankers Association said Wednesday.
And housing starts, a measure of U.S. home-building, fell 9.6% in July from June, the Commerce Department said this week. Residential permits, which can be a bellwether for future home construction, fell 1.3%.
Private-sector residential spending fell at a seasonally adjusted annual rate of 14% in the second quarter, according to the Commerce Department. That contributed to a 0.9% decline in overall economic growth during the quarter.
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Bill Adams,
chief economist at Comerica Bank, said he expects residential investment to fall at a 16% rate in the third quarter, now under way.
“Housing has gone from a tailwind in 2020 and 2021 to a big headwind for the economy,” he said.
Fed officials say higher interest rates are intended to cool demand in the economy, which should take pressure off consumer prices.
Falling home sales suggests demand for housing, one of the most interest-rate-sensitive sectors in the economy, is softening. But the supply of homes for sale, though it increased in June, remains historically low, which has offset lower demand and kept prices high. That has made it especially difficult for first-time buyers to enter the market.
“Just in the last 45 days, it’s a whole new market,” said Quentin Dane, a real-estate agent in Raleigh, N.C. The number of new leads coming into his brokerage has dropped by half, he said, and the inventory of homes for sale has increased. “We’re definitely seeing buyers take a breath,” he said.
Nicholas and Katie Carosella began looking for a house to buy in the Philadelphia suburbs in the spring.
Photo:
Nicholas Carosella
Almost 16% of home-purchase agreements that were pending in July fell through, the highest level since April 2020, when the pandemic disrupted the market, according to real-estate brokerage
Redfin Corp.
Some buyers are backing out if sellers won’t renegotiate the price or make requested repairs, and others are worried about a potential recession, Redfin said.
Nicholas and Katie Carosella started house hunting in the Philadelphia suburbs this spring and lost out to other buyers on two offers. In June, the market started to shift, Mr. Carosella said.
“All of a sudden, as mortgage rates continued to climb, it seemed like there was a frenzy of houses coming on the market,” he said. Homes started sitting on the market longer, especially those that needed renovations. “Buyers were becoming pickier,” he said.
The Carosellas had their third offer accepted in June for about 3.3% above the asking price. When they listed their current home for sale in July, it also sold slightly over the asking price.
owner of The Wall Street Journal, also operates Realtor.com under license from NAR.
Write to Nicole Friedman at nicole.friedman@wsj.com and David Harrison at david.harrison@wsj.com
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