Housing Bubble Woes: Supply Jumps, Sales Drop, Median Price Skewed Higher by Shift in Mix as Bottom Falls Out below $500k, amid Holy-Moly Mortgage Rates

by Wolf Richter, Wolf Street:

California special: Pending sales collapse by 30%, prices begin to “moderate,” San Francisco condo prices decline year-over-year.

Sales that closed in May of previously-owned single-family houses, condos, co-ops, and townhouses fell by 3.4% from April, based on the seasonally adjusted annual rate of sales, and by 8.6% from a year ago, the National Association of Realtors reported today.

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Sales of single-family houses alone dropped by 7.7% year-over-year. Sales of condos and co-ops dropped by 15.3% year-over-year.

May was the tenth consecutive month of year-over-year declines. The old saw that there’s no inventory for sale is no longer an excuse because supply jumped 12.6% in May – so sharply falling sales on sharply rising supply (data via YCharts):

“Further sales declines should be expected in the upcoming months given housing affordability challenges from 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 homes, the lowest since the lockdown sales rates (data via YCharts):

Inventory for sale and supply jump.

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

Supply of homes listed for sale jumped to 2.6 months, from 2.2 months in April, and from 2.5 months in May last year, the first year-over-year increase since the lockdown. This is quite a change from the low in January of 1.6 months (data via YCharts).

Sales by Region.

Percent change of the seasonally adjusted annual rate of total home sales in May from April, and year-over-year (yoy):

  • Northeast: +1.5% from April, -9.3% yoy.
  • Midwest: -5.3% from April, -7.5% yoy.
  • South: -2.8% from April, -8.4% yoy.
  • West: -5.3% from April, -10.0% yoy.

In California, closed sales plunged, pending sales collapsed.

According to the California Association of Realtors (CAR), sales that closed in May of houses plunged 15.2% in May year-over-year; and sales of condos plunged 12.3%. These are closed sales.

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

Holy-Moly Mortgage rates.

The average 30-year fixed mortgage rate spiked to over 6% last week for the first time since 2008, according to the daily measure by Mortgage News Daily. According to the most recent reading by Freddie Mac last week, the average mortgage rate spiked 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 home they want to buy.

But sales that closed in May are based on mortgage rates of the prior month or two, when they were much lower. Until mid-April mortgage rates were in the 4% to 5% range. In May, mortgage rates were just a little above 5%.

It’s in June, when the spike took off with renewed vigor, and we haven’t seen much housing data on June yet, except that luxury sales in Manhattan plunged by 70% year-over-year in the week through June 19, but that was mostly due to the sell-off in the stock market.

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