The National Association of Realtors reported this morning that July sales of preowned homes fell to their lowest level in 2½ years, the latest sign of a pronounced slowdown in the housing market during the past year.
The Realtors' group says people bought existing homes at a seasonally adjusted annual rate of 6.33 million units during the month. That's 4.1 percent lower than in June, and 11.2 percent below the level from a year ago. Economists were expecting the number to be closer to 6.58 million units. In August 2005, nearly 7.2 million units were sold.
The report also showed that the median price of a home sold in July was $230,000, down slightly from the previous month but still above the level from a year ago (by 0.9 percent). Many economists had predicted a negative year-over-year growth for the first time in more than a decade, but that didn't happen this month.
Why Is This Happening?
David Lereah, chief economist at NAR, said it best in the press release: "Many potential home buyers have been on the sidelines, some kicking the tires but mostly waiting for sellers to compromise on prices and terms."
Interest rates have increased over the past year, which has given buyers pause when they're looking at buying a home. Freddie Mac says that on average a 30-year fixed rate mortgage is now 6.52 percent (up from 5.80 percent a year ago). Another factor -- jobs growth is slowing, which gives many first-time buyers another reason not to jump into the ownership pool.
Buyer hesitance has led to price-reduction signs popping up across the country and a significant uptick in inventory levels to their highest point in more than a decade. At this time, there's a 7.3 months' supply of homes on the market. That's the highest level we've seen since April 1993.
What Does This Mean for Consumers?
If you want to buy, you might see better pricing power in the next few months. If you're trying to sell your house, expect it to take longer than you'd initially imagined, and expect offers to come in below your asking price.