US existing home sales slide again in June

US existing home sales fell for a fifth straight month in June to the lowest level in 2 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 per cent to a seasonally adjusted annual rate of 5.12 million units last month, the lowest level since June 2020 when sales were rebounding from the Covid-19 lockdown slump, the National Association of Realtors (NAR) said on Wednesday (Jul 20). 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 per cent of US home sales, dropped 14.2 per cent on a year-on-year basis.

The median existing house price climbed by 13.4 per cent from a year earlier to an all-time high of US$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 per cent from May and up 2.4 per cent 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 per cent, but the backlog of homes yet to be built hovered near record highs.

At June's sales pace, it would take 3.0 months to exhaust the current inventory of existing homes, up from 2.6 months a year ago. A 6-to-7-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 per cent of sales, up from 27 per cent in May. All-cash sales made up 25 per cent of transactions.

The housing market, which is very sensitive to interest rates, has softened notably this year as the Federal Reserve lifts rates aggressively to blunt inflation that is running at its highest pace in 4 decades.

The average contract rate on a 30-year fixed-rate mortgage climbed to nearly 6 per cent in June, according to the Mortgage Bankers Association, up from about 3.3 per cent 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 per cent, 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. REUTERS