Mortgage rates nearly 7% for spring selling season: Prices of existing homes fall 13% from peak to lowest sales since 2010

The market is still frozen, with potential sellers sitting on vacant properties, hoping this too shall pass. Cash buyers, investors, second home buyers and retreats.

By wolf richter For wolf street,

Spring sales season begins with 7% mortgage rates? In terms of closed sales, December and January generally mark the low-point of the year for the housing market, with deals made over the holiday period in November and December. But the spring sales season starts now.

In January, mortgage rates had plummeted on hopes of a rapid Fed pivot and a rapid rate cut, yes please, to 3% or whatever, but that dream is now being shattered.

The average 30-year fixed mortgage rate rose to 6.87% today, according to Mortgage News Daily. The 10-year Treasury yield is rising over the 4% mark – currently at 3.96%. And these rates are going to affect the spring sales season.

“This too shall pass” has been the guiding principle for potential sellers as they wait for the Fed to lower its interest rates enough to bring mortgage rates back to 3% so that they can hold on to March 2022 prices. Sell ​​your properties. , So potential sellers are not putting their vacant properties on the market unless they have to, and buyers are not buying at March 2022 prices. And the markets are essentially frozen.

For deals, potential sellers need to be realistic about price at current mortgage rates. Those who had listed their properties months ago and struck a deal at any cost are now ahead of the game.

Sales of previously owned homes, condos and cooperatives fell Another 0.7% in December to January, to a seasonally adjusted annual rate of 4.0 million home sales, According Today for the National Association of Realtors. This was the 12th straight month of monthly decline on a seasonally adjusted basis. There has been a 37% year-on-year decline, down from the May 2020 lockdown lows since 2010 during the housing bust1.

Real sales in January – not seasonally adjusted, and not as an annualized rate – fell to 231,000 properties, down 34% from a year earlier (historical data YCharts,

sales of single family homes Homes fell at a seasonally-adjusted annual rate of 3.59 million homes in December to January, down 0.8% and 36% year-on-year.

Sales of condos and co-ops were broadly unchanged from December, but fell 43% from January a year earlier to a seasonally adjusted annual rate of 410,000 units.

Sales fell in all regions, Percentage change year-over-year (NAR map of regions):

Average price The number of homes of all types fell for the seventh consecutive month to $359,900, down 13.2% from the June high. The decline reduced year-to-date gains to just 1.3%.

How much of this June-December price drop is seasonal, The average June-January decline in the eight years prior to the pandemic was 8.0%. Including the pandemic, the average June-January decline over the past 10 years was 6.5%. This suggests that the seasonal decline is only a fraction of the 13.2% decline since June (historical data via YCharts).

Some markets are holding up better in the US but others are leading the decline, including San Francisco Bay Area, where average prices fell 35% from the peak in March 2022 and 17% year-over-yearAccording to data from the California Association of Realtors.

Rapidly vanishing price advantage year on year In national data, it was down just 1.3% in January, providing additional confirmation that this decline was not seasonal. For 23 months, from August 2020 to June 2022, year-to-date gains were over 10%, and for several months during that time were over 20% (historical data via YCharts):

All-cash buyers, investors and other home buyers pulled back further, All-cash sales fell 29% year-on-year for 67,000 properties, down from 95,000 in January 2022. Sales to individual investors or second home buyers fell 52% to 37,000 properties in January 2022.

Inventory is low, buyers are few, the market is frozen,

active listing (= total listed inventory minus properties with pending sales) rose 65% from a year earlier to 626,000 properties in January. But they remained low by historical standards as potential sellers are still convinced that this too shall pass, and are not putting their vacant properties on the market (via Data),

How many vacant properties are being kept off the market? According to Census data, the actual vacancy rate for the entire housing stock stood at 10.4% or 14.55 million housing units in Q4, of which around 11 million housing units were vacant for the year. from them, 6.7 million vacant housing units were being kept off the market due to various reasons, If just 10% of these vacant properties are being taken off the market suddenly appear on the market, there will be more than active listings (currently 626,000) double,

average day on the marketDepressed seller removes property from market, or days before property is sold, jumped to 75, highest since Feb 2020 (via data),

Price cut: According to data, the number of listings with price reductions increased 170% year-over-year to 190,000 listings, the most for any January since January 2020.

Priced right, almost any property will sell. Not enough sellers want to price their properties yet, but more are trying: Across all active listings, there was a 30% price drop in January, now for any January in data going back to 2016. Biggest part ever. This shows that there is an increase in sellers’ willingness to explore the market clearing price, which is a good sign in case the market is illiquid.

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