The housing market is finally starting to normalize as home sales declined by a double-digit percentage while inventory similarly rose between June and July, according to data from Remax.
The month-to-month 16.6% decline in home sales was also the first since January, Remax found. Sales were down 26.3% from July 2021. The data covers 53 markets using multiple listing service data.
Meanwhile, the for-sale inventory rose for the fourth consecutive month, with 13.3% more homes for sale in July than in June and 30.4% more than a year ago. As measured in months, the supply is now at 1.8, having doubled since May. But this is still well below the six months’ supply that’s traditionally considered to be in balance with demand.
New listings were down 7.8% compared with June and 7.2% from July 2021.
“The market is rebalancing after favoring sellers for so long,” Nick Bailey, Remax president and CEO said in a press release. “There’s still ground to make up with new construction, but the change in recent months has brought some much needed relief to buyers.”
A calming market is still a good one for sellers as well, Bailey noted.
First American Financial noticed the same trend in its monthly Potential Home Sales Model report for July. The existing-home sales potential was estimated to be 5.45 million units at a seasonally adjusted annualized rate, down 0.2% compared with June and 14.4% lower than one year ago.
As previously reported, June’s existing home sales were the lowest since February 2019 (except for the early months of the pandemic in spring 2020), noted First American Chief Economist Mark Fleming.
“The decline is not a crash, but rather an adjustment to a not-so-new normal,” Fleming said in a press release. “Potential home buyers are facing greater economic uncertainty and mortgage rate volatility, but there remains a deep-seated desire for homeownership, especially among millennials.”
The Freddie Mac Primary Mortgage Market Survey found rates for the 30-year fixed increased 23 basis points for the week of Aug. 11. But this followed a 55 bps decline over a two week period.
The market is settling into a pace that is in line with more historic normal trends, so Fleming is relatively upbeat about the future.
“From the perspective of home buyers and sellers, there are financial concerns that may hold them back from the market, but there are still plenty of reasons to jump in,” Fleming said. “Millennials continue to age into their prime home-buying years, which will keep long-run demand steady.”
When it comes to sellers, the market with rising interest rates and home prices is a double-edged sword.
“Since home sellers are also prospective home buyers, homeowners choosing not to sell reduced housing market potential by 84,000 sales compared with one year ago,” Fleming said.
But record levels of equity gives sellers a funding base for purchasing that next home that better fits their needs. So in Fleming’s calculations, “rising home prices contributed to an increase of 154,000 potential home sales compared with one year ago.”
For the 53 markets covered by Remax, the median sales price in July was $415,000, down 2.9% compared with June, but up 8.1% from July 2021.
Dallas was the only metro area with a year-over-year price decline, 1.9% lower, while 27 had double-digit increases, including Tampa, Florida, up 23.7%; Fayetteville, Arkansas, up 21.6%; and Raleigh, North Carolina, up 19.1%.
The metro areas with the largest annual decrease in home sales by percentage were: Houston, 45.1% lower; San Diego, 42.1% down; and Miami, a decline of 40.9%. But no metro area tracked by Remax had a year-over-year sales percentage increase.