Home Sales Drop, Mortgage Rates Fall to New Lows

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Mortgage rates are hitting historic lows. According to the Freddie Mac Primary Mortgage Market Survey, the 30-year fixed-rate mortgage for the week ending July 2 averaged 3.07%; this is the lowest rate ever recorded in the survey’s 49-year history. At the same time last year, the 30-year fixed-rate mortgage averaged 3.75%. According to Sam Khater, chief economist for Freddie Mac, “On the economic front, incoming data suggest the rebound in economic activity has paused in the last couple of weeks with modest declines in consumer spending and a pullback in purchase activity.” All of this suggests that the 30-year fixed-rate mortgage could drop below 3% by the end of 2020.

Home Sales Are Down
The coronavirus outbreak led to a decline in existing-home sales over the past three consecutive months. According to the National Association of Realtors (NAR), every sales region in the country experienced drops in both month-over-month and year-over-year sales. “Sales completed in May reflect contract signings in March and April—during the strictest times of the pandemic lockdown and hence the cyclical low point,” says Lawrence Yun, chief economist for NAR. As the economy starts up again, Yun expects home sales to increase in the second half of the year.

Housing Inventory Falls Below Last Year’s Levels
By the end of May, there were 1.55 million units available for sale, up 6.2% from a month earlier but down 18.8% from May 2019. At the current sales pace, the housing stock would supply the market for 4.8 months; in comparison, there was a 4-month supply in April and a 4.3-month supply a year ago. Of all the homes sold in May, 58% remained on the market for less than a month. On average, properties remained available for sale for 26 days, unchanged from May 2019.

Home Prices Are Up
Home sales might have declined, but home prices are still increasing. The median existing-home price increased in every area except the West. This was the 99th consecutive month of year-over-year price increases.  Yun believes that a boost to new home construction is needed to meet an increase in housing demand; “otherwise, home prices will rise too fast and hinder first-time buyers, even at a time of record-low mortgage rates.”

Regional Sales Breakdown

Northeast: Existing-home sales annual rate of 470,000; a decrease of 13% from April 2020 and 29.9% from May 2019. The median sales price increased 7.8% from May 2019.

Midwest: Existing-home sales annual rate of 990,000; a decrease of 10% from April 2020 and 20.2% from May 2019. The median sales price increased 3% from May 2019.

South: Existing-home sales annual rate of 1.73 million; a decrease of 8% from April 2020 and 25.1% from May 2019. The median sales price increased 2.1% from May 2019.

West: Existing-home sales annual rate of 720,000; a decrease of 11.1% from April 2020 and 35.1% from May 2019. The median sales price decreased 0.2% from May 2019.