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Existing-home sales cool again

The U.S. housing market showed more signs of slowing down in July. Existing-homes sales fell for the fourth straight month, hampered by higher prices and rising mortgage rates, according to the National Association of Realtors (NAR).

Overall, sales fell 70 basis points over the month to an annualized pace of 5.34 million, the lowest level in two years, NAR reported. That was also 1.5 percent lower than the pace a year earlier. The pace of sales ran behind last year’s level for the fifth straight month. Sales haven’t been this slow since February 2016, when they were at 5.21 million.  

existhomeRealtors blamed the slowdown on high home prices and the rise in the 30-year fixed interest rate, which has hovered around 4.5 percent this summer. The rate actually fell four basis points in July from June, to 4.53 percent, but in 2017 rates averaged 3.99 percent, according to Freddie Mac surveys.  

The median home price of $269,600 was up 4.5 percent from July 2017, and has risen year over year for 77 consecutive months. Total housing inventory also remained tight, declining by 50 basis points in July to 1.92 million existing homes available for sale. The inventory is roughly the same as last year.

“Too many would-be buyers are either being priced out, or are deciding to postpone their search until more homes in their price range come onto the market,” NAR Chief Economist Lawrence Yun said.

“In addition to the steady climb in home prices over the past year, it’s evident that the quick run-up in mortgage rates earlier this spring has had somewhat of a cooling effect on home sales,” Yun added. “This weakening in affordability has put the most pressure on would-be first-time buyers in recent months, who continue to represent only around a third of sales, despite a very healthy economy and labor market.”

Consumer demand, though, continues to show signs of life. The average listing sold in 27 days in July, down from 30 days a year ago. Fifty-five percent of homes sold in July were on the market for less than a month, according to NAR.

The West region was only region to see an uptick in sales over the month, rising 4.4 percent from June, NAR said. Sales in the Northeast drove the general slowdown in sales, declining by 8.3 percent over the June level. On a year-over-year basis, sales were down in all regions of the country.

Freddie Mac Deputy Chief Economist Len Kiefer said sales have fallen only modestly, however, and better times for the market could be ahead.

“The broader economy, including the crucial labor market, remains robust,” Kiefer said. “With mortgage rates stabilizing over the summer, look for housing market activity to see modest growth later this year.”


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