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Plunging Home Sales Push Prices Down From Record Highs—Here’s What Experts Predict As Housing Market Turmoil Continues


Existing home sales fell for the sixth-straight month in July as rising affordability concerns sideline potential home buyers—and prices are finally starting to edge down from record highs amid the cooling demand, as experts project the next few months could be critical for the housing market.

Key Facts

Existing home sales slid 5.9% from June to a seasonally adjusted annual rate of 4.8 million in July, down from more than 6 million one year ago after widespread declines across the U.S., according to data released Thursday by the National Association of Realtors.

In a statement, NAR chief economist Lawrence Yun said the ongoing decline in recent months reflects the impact of rising mortgage rates, which peaked at 6% in June and have driven up the cost of monthly payments on new mortgages by an average of hundreds of dollars each month.

Amid the falling demand, the median existing home price fell from a record high of $413,800 in June to $403,800 last month, breaking a five-month streak of gains and hitting the lowest level since April.

“We’re witnessing a housing recession in terms of declining home sales and home building; however, it’s not a recession in home prices,” Yun said, noting prices are still up nearly 11% from one year ago and have risen on a yearly basis for 125 consecutive months, the longest streak on record.NAR projects the median existing home price could fall more than 5% to $380,000 by the end of this year, but that’s still about 5% higher than one year ago.

In emailed comments after the report, Pantheon Macro chief economist Ian Shepherdson said prices will “have to fall a lot further” before the housing market reaches a new equilibrium, noting that it would take 3.1 months to sell off the current supply of existing homes (based on the current pace of sales) versus just 1.7 months back in January.


Home sales “may soon stabilize” since mortgage rates have since fallen to about 5.4%, Yun adds, saying the respite should give an “additional boost of purchasing power to home buyers” even though rates are still about 2 percentage points higher than one year ago.

What We Don’t Know

Experts have increasingly worried the housing market collapse could help spark a recession as the Federal Reserve raises interest rates. Last month, the Bureau of Labor Statistics reported the economy unexpectedly shrank for a second-consecutive quarter, and partly blamed the worse-than-expected data on declines in residential investments (or home buying). “The turmoil in the housing market alone won’t change the Fed’s policy path, but for those on the [Federal Open Market Committee] who are worried about overdoing the pace of tightening, it will set alarm bells ringing,” says Shepherdson.

What To Watch For

Because housing costs have been a large component of surging inflation this year, Bill Adams, the chief economist for Comerica Bank, says “a much cooler housing market” will help push down core inflation next year.

Key Background

Historically high savings and low interest rates drove record growth in home sales and prices during the pandemic, but this year brought forth a stark turnaround after the Fed started raising interest rates in March. On Tuesday, Fitch Ratings released a note warning that the likelihood of a severe downturn in U.S. housing has climbed as homes have become increasingly unaffordable for most Americans. The firm predicts only a “moderate pullback” in the housing market, but it also acknowledged that housing activity could fall roughly 30% or more over a multi-year period in a worst-case scenario.

Further Reading

Housing Market Faces Growing Risk Of Multi-Year Collapse As New Home Construction Craters (Forbes)

Mortgage Demand Falls To New 22-Year Low As Housing Market Fuels Recession Fears (Forbes)

Housing Market Recession Is Here: Home Builders Slash Prices As Buyers Cancel Contracts, Mortgage Rates Rise (Forbes)