My prediction of prices increasing for the first time YoY didn’t quite happen, although this is due to the condo market. House prices were flat YoY, with condos down 2%. Home prices above $2M decreased as the higher-end market cooled off. However, prices below $2M continue to increase. The first-time homebuyer market is still strong and will continue as inventory remains super tight.
|
Year-over-Year (YoY) |
Month-over-Month (MoM) |
|
|
Homes for sale |
-18% |
+1% |
|
New Listings |
-23% |
-4% |
|
Homes in escrow |
-16% |
-6% |
|
Closed sales |
-22% |
-20% |
|
Median sale price |
-1% |
-1% |
After seeing solid sales over the past two months, we saw a massive drop in closed sales MoM. This could be a combination of a few things - seasonal swings, buyer fatigue and, of course, rates. We saw the same decline in sales in July last year, with many people taking off for vacation. There could also be buyer fatigue, with buyers fed up with the severe lack of good inventory. The hope of rates coming down this year could be dashed. So knowing you’re going to be locked into a high rate longer than expected could be added incentive to wait. Although I could easily be saying something different by the end of the year, given how unstable rates have been the past 12 months.
Prices
July marked the first time this year that house prices weren’t lower than at the same time a year ago. However, prices now are still 9% lower than last year's peak around May. Prices are currently on par YoY because July last year saw a huge dropoff in market activity as rates shot up at a record pace. Rates are roughly 2% higher than a year ago, which has diminished buyers purchasing power by around 20%. So even though buyers can afford 20% less, prices are only down 9% from the peak last year. That’s all because of inventory and supply vs demand.
Rates
I sound like a broken record here because I said the same thing last month. Interest rates were hammered last week. Rates last week were the highest they’ve been all year. Again there was mixed economic news, but the primary catalyst was the US credit rating being downgraded. Investors didn’t like this at all, and it caused the bond market to react in a big way. This week is a big week for economic data, so expect the bond market to react accordingly.
