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August 22nd Newsletter
Ali Hedayatifar
August 22, 2022
Week of August 15, 2022 in Review
July brought a slowdown in home sales and home construction. Does this mean we’re in a housing recession? Find out the answer and more in these crucial stories:
- What the Slowdown in Existing Home Sales Means for Home Prices
- Confidence Among Home Builders Falls Below Key Threshold
- Key Takeaway From the Slowdown in Home Construction
- The Significance of Jobless Claims Data
- Fed Minutes Show Acknowledgment of Slowdown
What the Slowdown in Existing Home Sales Means for Home Prices
Existing Home Sales fell 5.9% from June to July to a 4.81 million unit annualized pace, per the National Association of Realtors (NAR). Sales were also down 20.2% when compared to July of last year. This is a critical report for taking the pulse of the housing market, as it measures closings on existing homes, which represent around 90% of the market. June’s report likely reflects people shopping for homes in May and June, which included the peak in rates that we saw in June.
What’s the bottom line? The annual decline in sales has led many, including NAR’s chief economist Lawrence Yun, to say that we are in a “housing recession.” However, there is a big difference between a housing activity recession, which we are clearly in, and a home price recession.
Activity has no doubt slowed, but home prices are still being supported by low inventory. There were 1.31 million homes available for sale at the end of July and this equates to a 3.3 months’ supply of homes. However, six months is considered a balanced market, so this data speaks to the ongoing imbalance of supply and demand, which should continue to be supportive of home prices. In addition, there were only 748,000 “active listings” in July, which means that 43% of the “inventory” in the Existing Home Sales report is under contract and not truly available. This speaks to demand, as a normal market has 25% of inventory under contract.
There were also signs that demand is still strong if homes are priced correctly. Average days on market remained at a blistering 14 days, which is the fewest since NAR began tracking this data in 2011.
Lastly, CoreLogic’s Single-family Rent Report showed that single-family rent prices remained elevated in June, up 13.4% from a year earlier. This is near the record high 13.9% annual gain reported in May. These increases in rental prices should continue to push people to see the opportunity in housing, which again will help homes continue to appreciate.
