June 21, 2022 | 10:53
U.S. Existing Home Sales: Running Down That Hill
U.S existing home sales fell 3.4% to 5.41 mln a.r. in May. That marks the fourth straight monthly decline and the lowest level in two years. After hitting a 15-year high back in January 2021, sales have lost steam quickly and are now close to 4% below February 2020 levels amid record prices and an acceleration in borrowing costs. The 30-year fixed rate mortgage hit 5.8% last week, the highest since 2008. Regionally, sales in the highly populated South fell 2.8% to the lowest level since June 2020, while the Midwest and West both posted a 5.3% drop even as the Northeast gained for the second month in a row, up 1.5%.
The median sales price surpassed the 400k-mark for the first time ever. Prices climbed 14.8% y/y to an all-time high of $407,600. Following the FOMC statement last week, Chair Powell noted “prices might keep going up for a while even in a world where rates are up” as inventory remains “incredibly low”. Indeed, inventory is very lean. The number of homes available for sale fell 4.1% y/y. At the current pace, it would take 2.6 months to sell all homes on the market. Although trending up, it still underscores tight market conditions. Last week’s housing starts report showed a gasping 14.4% plunge in May as builders continue to face challenges amid rising prices and supply constraints.
The combo of low supply, high prices and rising interest rates are creating major hurdles for potential home buyers, particularly for the first-timers. Rising home prices are also putting upward pressure on rents, a core inflation driver. Looking ahead, all signs point to a weakening housing market as financial conditions tighten further.