There’s been a lot of speculation lately about the impact higher mortgage rates might have on the housing market, with some arguing that they’ll simply slow purchases, while another claimed they’ll lead to smaller home purchases.
Regardless, we now have our first clue, thanks to the release of the Commerce Department’s new home sales report this morning.
The government agency noted that sales of new single-family homes fell 13.4% in July from one month earlier to an annualized pace of 394,000 units.
This was well below the revised 455,000 pace seen in June, though it did handily beat out of the 369,000 sales pace seen a year earlier.
Housing Inventory Finally Rising
Still, it was the slowest month for new home sales since October. As a result, there were a total of 171,000 new single-family homes for sale as of the end of July, the highest total since April 2011.
That represented a 5.2-month supply at the current sales pace, the largest since January 2012.
In other words, things appear to be slowing down finally, with many speculating that it is the higher mortgage rates to blame.
The Census Bureau report actually paints a more current picture because the “sales” are actually just signed contracts or deposits taken, as opposed to completed sales.
So if these actions actually originated in July, it means the individuals buying the homes are dealing with the new, higher mortgage rates, not the ones on offer back in May.
The existing home sales report released by the National Association of Realtors earlier this week painted a different picture because it includes completed sales, many of which probably originated months earlier.
That’s probably why existing home sales saw a “spike” in July, as NAR chief economist Lawrence Yun put it.
In time, that report should also reflect the higher-rate environment borrowers are grappling with, as even Yun admitted that housing affordability will become “less attractive” as a result of the interest rate shift.
Homes Sold in California Received an Average of 4.1 Offers
Despite that drab news, another report released today, the Campbell/Inside Mortgage Finance HousingPulse Tracking Survey, revealed that key housing metrics remained strong in July.
The time on market measurement slipped to 8.6 weeks, marking a three-and-a-half year low, while sales-to-list price ratios hit a new high of 98% last month.
And it appears that bidding wars are still alive and well, at least in hotspots like California.
In the Golden State, an average of 4.1 offers were received on all non-distressed properties sold last month, the best total for any state nationwide.
However, the Farmbelt (ND, SD, NE, KS, MN, IA and WI) didn’t fair too well, with an average of just 1.4 offers for every non-distressed sale.
California also took the top spot in the sales-to-list price ratio department with an average of 101.8% in July. Yes, that means the average property sold for more than its asking price. Conversely, Florida had the lowest average sales-to-list price ratio in July, at just 95%.
Kind of interesting how hot California remains, despite the fact that only 36% of buyers can afford a home there. Perhaps cash buyers are still on the prowl.
The silver lining to all of this is that any sort of bad economic news should at least contain mortgage rates, and could prompt the Fed to delay its expected tapering, which could keep rates from rising any further.