• Existing home sales fell to an annual rate of 4.81 million in July, the National Association of Realtors said.
  • That landed below the average forecast and marked the slowest pace in more than two years.
  • Home demand has crumbled through 2022 as rising mortgage rates cut into affordability.

Demand in the US housing market is fading fast.

Sales of previously owned homes slid for a sixth straight month in July to a seasonally adjusted annual rate of 4.81 million units, the National Association of Realtors said Thursday. That's down 5.9% from June's pace and 20.2% from the year-ago rate. It also marks the slowest rate of sales since May 2020.

Economists surveyed by Bloomberg forecasted a smaller decline to a 4.86 million-unit pace. July's reading suggests that the market is cooling faster than previously anticipated.

"We're witnessing a housing recession in terms of declining home sales and home building," Lawrence Yun, the chief economist at the National Association of Realtors, said. "However, it's not a recession in home prices. Inventory remains tight and prices continue to rise nationally with nearly 40% of homes still commanding the full list price."

Indeed, home prices are still climbing. During July, the national median list price was up 7% from last year, coming in at  $412,739. Although growth is moderating, home prices are still rising across the country — and that means even more buyers are likely to be priced out of the market. 

"Inflation and high mortgage rates are taking a bite out of homebuyer budgets," Daryl Fairweather, the chief economist at Redfin, said in a statement. "Few people are able to afford homes costing 50% more than just two years ago in some areas, so homes are beginning to pile up on the market."

The Thursday report extends a steep slowdown for a housing market that was running red-hot one year ago. The sector has been pummeled by rising mortgage rates throughout 2022. The Federal Reserve raised interest rates in recent months at the fastest pace since the 1980s in an attempt to ease demand and cool inflation. The hiking cycle lifted the average rate on a 30-year fixed-rate mortgage to a late-June high of 5.81%, up roughly 2.7 percentage points from levels seen at the end of 2021.

The rate has eased somewhat as investors expect the central bank to slow its hiking plans. The dip has offered some relief for prospective homebuyers looking to secure affordable home loans. The latest home-sales reading still shows the impact of higher mortgage rates in June, and the recent decline suggests the market cooldown could moderate as buyer demand rebounds, Yun said.

"Home sales may soon stabilize since mortgage rates have fallen to near 5%, thereby giving an additional boost of purchasing power to home buyers," he added.

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