In the month of August, existing home sales decelerated -19.87% y/y, following -20.07 y/y in the prior month. This marks the thirteenth consecutive month of negative y/y growth. On a m/m basis, existing home sales fell -0.41% in August after back-to-back declines of more than 5% in June and July. The median sales price of an existing home fell to $389,500, a -2.43% m/m decline following -3.53% in the prior month. The y/y rate slowed for the fourth consecutive month to 7.75%, well below its peak of 25.22% in May 2021. Overall sales volume is back to where it was in June 2020 at 4.8 million.
New home sales fell -0.15% y/y in August, an acceleration from the prior month’s -26.72% print. The m/m number came in near a record high of 28.76%, but just its second positive month in 2022. The median sales price for new homes during that period fell -6.33% m/m, the fastest decline in prices since May 2019, to $436,800. The magnitude of this deceleration has only occurred in twelve other months going back to December 2007, and five of those occurrences were during the Great Financial Crisis. The y/y rate fell to 8.04% from 14.85% in July, its slowest pace since November 2020. Overall sales volume for new homes is still below where it was pre-pandemic.
The pending home sales index decelerated -2.0% m/m to 88.4. The y/y rate fell at its fastest pace since April 2020 and is the third worst reading on record at -24.19%. This measure of housing demand leads existing home sales by one to two months, so there is a higher probability of continued weakness on that front.
Since the beginning of 2022, the average 30-year mortgage rate has increased 323 basis points to 6.75%. As rates have moved up, home prices have started to come down. The S&P CoreLogic Case-Shiller U.S. National Home Price Index has decelerated. The y/y rate fell to 16.06% in July, a 257-basis point deceleration which is the fastest decline on record. Separately, the FHFA House Price Index fell to 13.88% y/y in July, a 241-basis point deceleration which is also the fastest decline on record.
The slowdown in home prices is occurring in a period where consumer income data has continued to come in weaker. Personal income increased 3.86% y/y, down versus the Consumer Price Index in each month this year. Real average hourly earnings have also been negative throughout 2022.
Housing, an interest rate sensitive area of the economy, has weakened considerably this year. Additionally, consumer incomes are not improving. This dynamic provides more evidence towards economic activity slowing in 2022 versus 2021.
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Boyd Watterson Asset Management, LLC