Housing bubble woes: Supply jumps, sales drop, median price skewed up by composition shift as bottom falls below $500,000, amid Holy-Moly mortgage rates

California Special: Until sales collapse 30%, prices begin to “moderate”, San Francisco condo prices decline year over year.

By Wolf Richter for WOLF STREET.

Sales that closed in May of single-family homes, condos, co-ops and row homes from previous owners fell 3.4% from April, based on the seasonally adjusted annual rate of sales, and 8 .6% from a year ago, the National Association of Realtors reported today.

Sales of single-family homes alone fell 7.7% year over year. Sales of condos and co-ops fell 15.3% year over year.

May was the tenth consecutive month of year-over-year declines. The old finding that there is no stock to sell is no longer an excuse as supply jumped 12.6% in May – sharply falling sales on a sharply rising supply (data via Y-Charts):

“Further declines in sales should be expected in the coming months given housing affordability issues related to the sharp rise in mortgage rates this year,” the NAR report said.

The seasonally adjusted annual rate of sales in May fell to 5.41 million households, the lowest since the sales rate lockdown (data via YCharts):

Inventory for sale and supply jump.

The number of homes listed for sale in May jumped 12.6% from April to 113,000 homes, after jumping 100,000 homes in April to 1.16 million, the highest since November.

The supply of homes for sale rose to 2.6 months from 2.2 months in April and 2.5 months in May last year, the first year-on-year increase since the lockdown . That’s quite a change from January’s 1.6-month low (data via YCharts).

Sales by region.

Percentage change in seasonally adjusted annual rate of total home sales in May compared to April, and year-over-year (year-over-year):

  • Northeast: +1.5% compared to April, -9.3% year-on-year.
  • Midwest: -5.3% from April, -7.5% YoY.
  • South: -2.8% compared to April, -8.4% year-on-year.
  • West: -5.3% compared to April, -10.0% year-on-year.

In California, closed sales plunged, pending sales crashed.

According to California Association of Realtors (RCA) May Closed Home Sales fell 15.2% in May YOY; and condo sales fell 12.3%. These are closed sales.

Pending sales – a predictor of sales closed the following month – slumped 30.6% in May, “likely due to eroding affordability, rising mortgage rates and house prices, and increased risk of recession,” the CAR report notes.

Holy-Moly Mortgage Rates.

The average 30-year fixed mortgage rate hit more than 6% last week for the first time since 2008, according to Mortgage News Daily’s daily gauge. According to Freddie Mac’s most recent reading last week, the average mortgage rate jumped to 5.78%.

These mortgage rates are so named because “holy moly” is what people say when they look at the mortgage payment for the ridiculously inflated price of the house they want to buy.

But the sales made in May are based on mortgage rates from the previous month or the previous two months, when they were much lower. Until mid-April, mortgage rates were between 4% and 5%. In May, mortgage rates were just a little above 5%.

It was June, when the spike took off with renewed vigor, and we haven’t seen much housing data in June yet, except that Manhattan luxury sales fell 70% from a year ago. on the other during the week to June 19, but that was mainly due to the sell-off in the stock market.

The sales in May are based on deals that were largely negotiated in April, with mortgage rates from April and before, when these buyers applied for mortgages and obtained mortgage rate locks valid for a fixed period. . The green box shows mortgage rates that roughly applied to home purchases closed in May, around 4% to 5%.

Median price pushed up by mix shift to high-end sales.

In California: The median price rose to $899,000, up 9.9% year over year, according to the California Association of Realtors. But the median price is sensitive to changes in the mix, and according to the CAR, this price increase in the state “can be largely attributed to the sales mix, with the high-end market continuing to outperform more affordable market segments. . ”

The shifting mix is ​​seen in the share of million-dollar homes, which jumped to a record 35.3% share, while the share of homes priced below $500,000 hit an all-time low. .

“House prices could stabilize, however, as the monthly price increase appears to be moderating,” CAR said. And this is already the case in San Francisco.

In San Fransisco, the median condominium price fell 0.3% year over year. The median price of single-family homes in San Francisco rose 6.1%, the second-lowest gain of large counties in California, behind Contra Costa County (East Bay), where the median home price rose only than 1.0% year over year.

In the United States of A: the median price rose to $407,600, up 14.8% from a year ago, according to the NAR. And here too, as we’ll see in a moment, there’s been a huge shift to the top end (data via YCharts):

The median price is skewed by changes in the mix.

My favorite illustration: To get the median price in a market where 9 houses have sold, you rank them by price from highest to lowest, and the price of the fifth house from the top or the fifth from the bottom (same house) is the price in the middle = median price.

But if the two cheapest houses don’t sell, and if the remaining seven houses sell, the middle is now the fourth house down, or the fourth house up. This change in mix skews the median price measure, although actual house prices have not changed:

This change of mix is ​​what happened in the United States too.

Sales of homes priced below $500,000 have fallen, while sales above $500,000 have jumped year over year, and these dramatic shifts in the mix have skewed the median price higher , according to NAR data:

Investors’ share of sales and cash sales fell, but remained within the same range.

Individual investors or second home buyers bought 16% of homes in May, compared to 17% in April, 18% in March, 19% in February and 22% in January, according to the NAR.

“All-cash” sales, which include many investors and second-home buyers, fell to 25% in May from 26% in April, but rose from 23% a year ago.

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