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New York — US existing home sales fell for a fifth straight month in June to the lowest level in two years as record-high prices and fast-rising interest rates make buying a home too expensive for a growing share of American households.
Sales of previously owned homes fell 5.4% to a seasonally adjusted annual rate of 5.12-million units in June, the lowest level since June 2020 when sales were rebounding from the Covid-19 lockdown slump, the National Association of Realtors said on Wednesday. Sales have now fallen each month since January.
Economists polled by Reuters had forecast sales decreasing to a rate of 5.38 million units. Sales were unchanged in the Northeast and fell in the Midwest, the West and South.
Home resales, which account for nearly 90% of US home sales, dropped 14.2% year on year.
The median existing house price climbed by 13.4% from a year earlier to an all-time high of $416,000 in June. Sales remained concentrated in the upper-price end of the market amid a paucity of entry-level houses.
“Falling housing affordability continues to take a toll on potential home buyers,” NAR chief economist Lawrence Yun said in a statement. “Both mortgage rates and home prices have risen too sharply in a short span of time.”
There were 1.26-million previously-owned homes on the market, up 9.6% from May and up 2.4% from a year earlier. With demand cooling, monthly supply is likely to continue steadily improving. The government reported on Tuesday that housing completions in June decreased 4.6%, but the backlog of homes yet to be built hovered near record highs.
At June’s sales pace, it would take three months to exhaust the current inventory of existing homes, up from 2.6 months a year ago. A six-to-seven-month supply is viewed as a healthy balance between supply and demand.
Properties typically remained on the market for 14 days, the shortest ever. First-time buyers accounted for 30% of sales, up from 27% in May. All-cash sales made up 25% of transactions.
The housing market, which is sensitive to interest rates, has softened notably in 2022 as the Federal Reserve lifts rates aggressively to blunt inflation that is running at its highest pace in four decades.
The average contract rate on a 30-year fixed-rate mortgage climbed to nearly 6% in June, according to the Mortgage Bankers Association, up from about 3.3% at the start of the year, which has put home purchases out of reach for a growing number of prospective buyers, particularly first-time purchasers. The rate in the latest week was 5.82%, MBA said earlier on Wednesday.
While it is unclear how much higher mortgage rates will climb, it's almost certain they will remain high for some time with the Fed set to raise interest rates again at its policy meeting next week and more hikes to come through the end of the year.
An Oxford Economics index out last week showed homes were the least affordable in the first quarter of 2022 at any time since the 2007-2009 financial crisis, and it forecast that picture would worsen through the rest of this year.
Meanwhile, a survey out on Monday showed the National Association of Home Builders/Wells Fargo Housing Market Index suffering its second-largest drop on record in July, with a gauge of prospective buyer traffic falling below the break-even level of 50 for a second straight month.
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Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.