The housing market entered a recession in July. That's bad news for people who are planning to sell their homes, but it's some long-anticipated good news for would-be buyers. Sales of existing homes fell for a sixth straight month, declining by 5.9% from June. They're down more than 20% from July 2021.
The median sale price dropped by $10,000 in one month, declining to $403,800. In the previous five months of declining home sales, the median price kept rising to a record $413,800 in June.
"The ongoing sales decline reflects the impact of the mortgage rate peak of 6% in early June," said NAR Chief Economist Lawrence Yun. "Home sales may soon stabilize since mortgage rates have fallen to near 5%, thereby giving an additional boost of purchasing power to home buyers."
There was more good news for people who want to buy a home. Total housing inventory at the end of July was 1,310,000 units, an increase of 4.8% from June and unchanged from the previous year. That’s still historically low, but at least it’s moving toward a more balanced market. Unsold inventory sits at a 3.3-month supply at the current sales pace, up from 2.9 months in June and 2.6 months in July 2021.
Getting back to normal
Jeb Smith, a Coldwell Banker agent in Huntington Beach, Calif., says the housing market has been moving back to more normal inventory levels for the last couple of months.
“That means buyers are having to do less of the crazy stuff they were having to do during the pandemic to get their offer accepted,” Smith told ConsumerAffairs. “On top of the shift due to rates, we are now past the busiest point in real estate, the spring selling season, which means that demand should continue to decline due to the time of year giving homebuyers more opportunities with less competition and more homes to choose from as we transition through the rest of 2022.”
Despite the slowdown in sales and the drop in prices, the housing market appears to be remaining healthy for now. Distressed sales – foreclosures and short sales – represented approximately 1% of sales in July, which is essentially unchanged from June 2022, and July 2021.
People who were selling their homes had little difficulty doing so in July. Homes typically remained on the market for 14 days in July, the same as in June and down from 17 days in July 2021. In fact, the 14 days on market are the fewest since NAR began tracking that stat in May 2011.
Eighty-two percent of homes sold in July 2022 were on the market for less than a month.