Home sales fell last month for the fifth consecutive month as housing continues to become less affordable across the country. According to a recent National Association of Realtors (NAR) report, existing-home sales dropped by 5.4% in June to a seasonally adjusted annual pace of 5.12 million, a sizable 14.2% decrease from the previous year. However, the NAR said that for the 12 months ending in June, the median existing-home sales price jumped to $416,000, an increase of 13.4%. The price rise caps the longest ever stretch of annual price increases at 124 months.
NAR Chief Economist Lawrence Yun stated, “Falling housing affordability continues to take a toll on potential home buyers. Both mortgage rates and home prices have risen too sharply in a short span of time.” Yun also noted that “If consumer price inflation continues to rise, then mortgage rates will move higher. Rates will stabilize only when signs of peak inflation appear. If inflation is contained, then mortgage rates may even decline somewhat.”
Mortgage rates have spiked in recent months as a result of three interest rate increases by the Federal Reserve to combat inflation, but they have subsequently eased a little as a result of worries that the economy has started to slow down and may enter a recession. Additionally, mortgage demand recently dropped more than 6%, falling to its lowest level in over 20 years, according to the Mortgage Bankers Association.
According to Freddie Mac, the typical 30-year fixed-rate mortgage had a rate of 5.51% as of Wednesday, an increase of more than 2.6 percentage points from the previous year. Recently, the Fed stated that it will boost its target interest rate by two-thirds of a percentage point, the most significant rise since 1994. The Fed is also anticipated to increase interest rates by the same amount soon. The move is intended to reduce spending in reaction to historically high inflation, which has continued to rise despite rate increases.
According to the recently issued consumer price index report, inflation increased to an agonizing 9.1% for the 12 months ending in June, the highest level in four decades. As a result, the Bureau of Labor Statistics reports that hourly wages, adjusted for inflation, fell by 1% from May to June alone and 3.6% over the last year.