Home News Housing Bubble Woes: Sales of Homes Below $500K Plunge, Total Sales Drop to Lowest since Lockdown, Supply Jumps

Housing Bubble Woes: Sales of Homes Below $500K Plunge, Total Sales Drop to Lowest since Lockdown, Supply Jumps

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The magic of tremendous home prices meeting holy mortgage rates.

To Wolfrichter For Wolf Street..

Sales of all types of pre-owned homes, including single-family homes, condominiums, co-operatives and townhouses, fell 5.4% from May to June, the fifth straight month of decline based on monthly declines. Seasonally adjusted annual sales. In addition, sales decreased 14.2% year-on-year, falling below the same month last year for 11 consecutive months.

Sales declines are accelerating, despite the sudden inventories of all kinds of woodwork. And there’s no excuse for a drop in sales that there is a shortage of homes on the market.

According to the National Association of Real Estate Agents, single-family home sales fell 12.8% year-on-year, and condominium and co-operative sales plummeted 24.7% (historical data from Y Charts).

“Both mortgage rates and home prices have skyrocketed in a short period of time,” NAR said. report today.

June seasonally adjusted annual sales fell to 5.12 million units, the lowest since the May, April and June blockades of May, April and June (2020). Y Charts):

Driver’s Holy Molly Mortgage Interest Rate.

I call them “Holy Molly Mortgage Interest Rates”. That’s because it can be heard when a homebuyer sees the mortgage payments needed to fund the ridiculously high price of the home he wants to buy.

According to the latest reading by Freddie Mac, average mortgage rates have skyrocketed from 2.9% a year ago to 5.5%. It broke through the 5% line in mid-April and is in the 5.5% range from mid-June.

If CPI inflation exceeds 9%, the 5.5% rate on 30-year fixed-rate mortgages remains surprisingly low, talking about long-term interest rate restraints and quantitative easing by the federal government, among other products, among other products. .. $ 2.7 trillion mortgage-backed securities will curb mortgage rates. But the quantitative easing is over QT dominates and Fed begins to shed mortgage-backed securities, And mortgage rates have taken the first step towards some sort of normal level. However, mortgage rates have been curtailed for years, causing prices to skyrocket and everything went wrong.

As always, when the market changes, a supply that no one has thought of begins to emerge from woodwork.

The number of homes for sale in June increased by 113,000 in May, 100,000 in April, and then increased by 110,000 from May to 1.26 million, the highest since September. rice field.

Last year, the industry lamented a “housing shortage” to hype prices. That was when the homeowner really refused to buy another home and put it on the market because he wanted to ride an old or vacant home. Raise the price surge to the top.This has now been achieved and these vacant homes are on the market

The supply of homes for sale surged to 3.0 months, the highest since August 2020, up 20% from a year ago. Supply has almost doubled since January’s lows (data from YCharts).

Sales by region.

Sales declined year-on-year in all regions. Note the 21.3% plunge in the west. In California, closed sales of homes plummeted 21% and closed sales of condominiums plummeted 27%. To show where this is heading in July: Pending sales in California fell 40%..

  • Northeast: -11.8% year-on-year.
  • Midwest: -9.6% year-on-year.
  • South:-14.1 years.
  • West: -21.3% year-on-year.

The median price was distorted by the shift to high-end sales of the mix.

According to the NAR, the median price rose 13.4% from a year ago to $ 416,000. And, as you can see, the median price was distorted by changes in the mix, shifting the mix significantly to the high end (YCharts data):

Repeat my favorite illustration. In a market where nine homes are sold, the median is the median (fifth from the top). If only the top 7 homes are sold, the bottom will fall, so the 4th home will be on the bottom or the 4th home will be on the top in the center. The actual price of the home hasn’t changed, but this mix change distorts the median metric.

In the US market, home sales of less than $ 500,000, which accounted for 62% of total home sales in June, bottomed out.

However, home sales of over $ 500,000 have increased year-over-year. Home sales ranging from $ 500,000 to $ 750,000 accounted for 20% of total sales. Homes ranging from $ 750,000 to $ 1 million accounted for 7%. Homes over $ 1 million accounted for 8% of sales.

And the big change in this mix was that the median price was distorted upwards, with fewer homes selling in the lower half and more homes selling in the upper half. According to NAR, sales by segment:

And don’t blame the West for this change in the mix. In the high-priced western part, home sales plummeted the most (21.3% year-on-year).A plunge in sales in the western part, where prices are higher than in low-priced areas, usually distorts the median. under.. So what we see is that the actual sales mix across the United States is changing, and high-end buyers are affected by the exorbitant affordability issues posed by these holy mortgage rates. It means that I haven’t received much.

No, investors, villa buyers, and full cash buyers are not gathered. Their share remained stable.

Private investors and second home buyers buy 16% of homes in June, as in May, 17% in April, 18% in March, 19% in February and 22 in January. Decreased from% share. NAR.

“Full cash” sales, including many investors and villa buyers, maintained their 25% share in June, the same as in May, down from a 26% share in April. Their share has been in the same range for the last 12 months.

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