As supply rises and mortgage rates rise, U.S. home sales fall to lowest since June 2020, plunge in coastal California metros

Sales at the top are strong. The bottom falls in the rest of the market. “Rising interest rates and rising house prices have lowered demand for housing.”

By Wolf Richter for WOLF STREET.

In the United States, sales of used homes – houses, condominiums and townhouses – fell 2.4% in April from March, based on the seasonally adjusted annual sales rate, and fell 5.9% compared to a year ago, with much more pronounced growth. condo sales (-13.9% year-over-year) down than home sales (-4.8% year-over-year), according to the National Association of Realtors reported today.

It was the ninth consecutive month of year-over-year declines, even as the supply of homes for sale continued to rise (data via YCharts):

“Rising home prices and sharply rising mortgage rates have reduced buyer activity,” the NAR report said. “It looks like more declines are imminent in the coming months.”

The seasonally adjusted annual rate of sales, at 5.61 million, was the lowest since June 2020 (data via Y-Charts):

Sales of single-family homes fell 2.5% in April compared to March, seasonally adjusted, and 4.8% year-over-year, to a seasonally adjusted annual rate of 4.99 million homes, the lowest since June 2020.

Condo sales fell 1.6% in April from March, seasonally adjusted, and 13.9% year-over-year to a seasonally adjusted annual rate of 620,000 condos, the lowest since July 2020.

By regionthe percentage change in the seasonally adjusted annual rate of total home sales in April compared to March, and year over year (yoy):

• Northeast: +15% compared to March, -10.7% year-on-year.
• Midwest: -3.1% from March, -1.5% YoY.
• South: -4.6% compared to March, -5.7% year-on-year.
• West: -5.8% compared to March, -8.1% year-on-year.

In California, sales plunged, except at the top.

According to a separate report from California Association of Realtors (RCA) April home sales volume fell 8.5% year over year; and condo sales plunged 20%,”as rising interest rates and house prices weighed on housing demandsaid the CAR.

Sales in California’s coastal metros have plunged the most, and that’s where prices have long entered the astronomical zone. Something serious is going on here:

In the Los Angeles Metro, which includes San Diego:

• Home sales: -16.8%
• Condo sales: -22.4%.

In the San Francisco Bay Area:

• Home sales -18.1%
• Condo sales: -13.8%

Central coast:

• Home sales: -21.3%
• Condo sales: -22.4%

California’s median price was skewed by a change in the mix, with strong sales at the top and weak sales in the rest of the market, changing the mix of homes sold. Median prices are very sensitive to variations in the mix. The CAR pointed out: the median price (+8.7% year-over-year) increased “mainly due to strong sales at the high end of the market”.

And the CAR added:

“A shift in sales mix continues to play a role in record statewide home prices as sales in high-priced markets remain stronger than their more affordable counterparts.

“The share of million-dollar home sales increased for the third consecutive month, reaching an all-time high of 34.7%. Sales of homes priced below $500,000, as to them, fell again in April and reached the lowest level on record.

“Sales fell double digits for the $750,000 and lower price segments, while sales above $2 million remained up year-over-year.

“The shift in the sales mix towards high-end homes is likely to persist in the months ahead.”

Sales volume is impacted by Holy-Moly mortgage rates and mega-prices.

The average 30-year fixed mortgage rate this week (with balances in line and down 20%) at 5.49% was about 2.2 percentage points higher than a year ago, data shows. of the Mortgage Bankers Association. The past two weeks have been the highest since 2009

But we haven’t seen anything yet. Today’s sales numbers are based on sales that were largely done in April and traded in March, with mortgage rates from January through March, when those buyers applied for mortgages and secured guaranteed mortgage rates (locked rates) which are good for a period of time, such as three months, to buy a home with. The green box shows the mortgage rates that applied to purchases closed in April, roughly between 3.2% and 4.8% (rate data via Investing.com):

The drop in mortgage applications for the purchase of a home indicates that over the next few months, the volume of sales will decline further. In the last reporting week, mortgage applications for purchase fell 15% from a year ago and returned to lows at the end of 2018 when the housing market began to crack below QT and rising interest rates (with mortgage rates just above 5% in November 2018).

At the time, inflation was below the Fed’s target, and the Fed pivoted in December 2018. But that pivot won’t happen this time, with runaway inflation being the biggest economic problem in the United States. United – and the Fed has barely started raising rates and won’t start QT until June.

Inventory for sale and increase in supply.

The number of homes for sale in the United States jumped 100,000 homes to 1.03 million in April, the first time to more than 1 million since October.

Supply of houses for sale in the United States rose to 2.2 months, from January’s low of 1.6 months (data via YCharts).

U.S. median price pushed by high-end sales. The bottom fell below $500,000.

In the United States, the floor slumped, with homes selling for less than $500,000. But sales are strong on the high end, just like in California, which changes the mix, which skews the median price (= the average price, with 50% of the houses selling more, and 50% selling less ). NAR image:

The median price in the United States rose 14.8% from a year ago to $391,200, partly due to the change in composition, with increased sales at the high end. Year-over-year spikes peaked in May and June 2021 at over 23% (data via YCharts):

Investors’ share of sales and spot sales fell, stayed in the same range.

Individual investors or buyers of second homes, which make up many cash sales, according to the NAR, bought 17% of homes in April, compared to 18% in March and 19% in February and 22% in January, but even as in April 2021 (17%).

All-cash sales fell to 26% of total sales in April, from 28% in March, and increased to 25% in April 2021.

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