4th Look at Local Housing Markets in July, California Sales off 31%, July Forecast

The big story for July existing home sales is the sharp year-over-year (YoY) decline in sales. Another key story is that new listings are down YoY in July. Of course, active listings are up sharply. And median prices are falling in some areas (see California below).

This is the fourth look at local markets in July. I’m tracking about 35 local housing markets in the US. Some of the 35 markets are states, and some are metropolitan areas. I’ll update these tables throughout the month as additional data is released.

We are seeing a significant change in inventory, but a decline in new listings. Most of the increase in inventory so far has been due to softer demand - likely because of higher mortgage rates.

California Home Sales Down 31% in July, Prices Decline

California doesn’t report monthly inventory numbers, but they do report the change in months of inventory. Here is the press release from the California Association of Realtors® (C.A.R.): Rising interest rates and affordability crunch drag down July home sales and prices, C.A.R. reports

Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 295,460 in July, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide. … July’s sales pace was down 14.4 percent on a monthly basis from 344,970 in June and down 31.1 percent from a year ago, when 428,980 homes were sold on an annualized basis. July marked the fourth consecutive monthly decline and the 13th straight annual decline.

California’s median home price declined 3.5 percent in July to $833,910 from the $863,790 recorded in June. The July price was 2.8 percent higher than the $811,170 recorded last July and was the smallest year-over-year price gain in more than two years. The price moderation is largely attributed to a change in the mix of sales in July, as million-dollar home sales plummeted nearly 25 percent from June.

The overall supply conditions in California loosened again, with the statewide unsold inventory index (UII) rising from 1.9 months in July 2021 to 3.2 months in July 2022, the highest level since May 2020. The improvement in the index was primarily due to a pullback in demand. The index indicates the number of months it would take to sell the supply of homes on the market at the current rate of sales.

emphasis added

Active Inventory in July

Here is a summary of active listings for these housing markets in July. Inventory usually increases seasonally in July, so some month-over-month (MoM) increase is not surprising. However, for these markets, inventory was up 14% from June to July.

Inventory in these markets were down 29% YoY in January, still down 16% YoY in March, and are now up 44% YoY! So, this is a significant change from earlier this year. This is another step towards a more balanced market, but inventory levels are still historically low in most markets.

Notes for all tables:

1. New additions to table in BOLD.

2. Northwest (Seattle), Santa Clara (San Jose), Mid-Florida (Tampa, Orlando), Jacksonville, Source: Northeast Florida Association of REALTORS®

3. Totals do not include Atlanta, Denver or Minneapolis (included in state totals)

   

New Listings in July

And here is a table for new listings in July. For these areas, new listings were down 7.5% YoY.

Last month, new listings in these markets were up 4.3% YoY. Overall, we aren’t seeing a pickup in new listings in these markets. In most markets, new listings are down YoY. This suggests the increase in active listings is due to less demand as opposed to more sellers.

Closed Sales in July

And a table of July sales. Sales in these areas were down 24.3% YoY, Not Seasonally Adjusted (NSA). Contracts for sales in July were mostly signed in May and June, and we are seeing the impact of higher mortgage rates on July closings.

Last month, all local markets I track were down 15.9% YoY, NSA. This appears to be another step down in sales, although there was one less selling day in July this year than in July 2021.

Here is a table comparing the year-over-year Not Seasonally Adjusted (NSA) declines in sales this year from the National Association of Realtors® (NAR) with the local markets I track. So far, these measures have tracked closely, and the preliminary data below suggests a sharp decline in sales in July.

Sales in some of the hottest markets are down 30% or more YoY (all of California was down 31%), whereas in other markets, sales are only down in the high teens YoY.

More local markets to come.

Early Read on Existing Home Sales in July

From housing economist Tom Lawler:

Based on publicly-available local realtor/MLS reports released across the country through today, I project that existing home sales as estimated by the National Association of Realtors ran at a seasonally adjusted annual rate of 4.90 million in July, down 4.3% from June’s preliminary pace and down 18.7% from last July’s seasonally adjusted pace. Unadjusted sales should show a larger YOY % decline, reflecting the lower business day count this July compared to last July. While virtually all markets saw a significant YOY decline in sales last month, the West region saw an especially large drop -- about 33% (NSA) by my estimate.

Local realtor reports, as well as reports from national inventory trackers, suggest that the inventory of existing homes for sale last month was up substantially from a year earlier. However, the NAR’s estimate may not show the same increase as these reports suggest, as most of these reports exclude listings with pending contracts. E.g., the Realtor.com report for July showed that listings excluding those with pending contracts were up 30.7% from last July, while listings including pending contracts were up just 3.5% YOY. (Pending listings in the Realtor.com report were down 19.4% from last July.) The NAR’s inventory estimate has tracked the Realtor.com total inventory measure more closely that the “ex-pendings” inventory measure. (Note also that the Realtor.com inventory number reflects average listings during the month, while the NAR inventory number is an end-of-month estimate.) Just as the NAR inventory number understated the decline in “effective” homes for sale during most of last year, it is now significantly understating the increase in effective inventory.

Finally, local realtor/MLS reports suggest the median existing single-family home sales price last month was up by about 10.6% from last July, a marked YOY deceleration from earlier this year.

CR Note: The National Association of Realtors (NAR) is scheduled to release July existing home sales on Thursday, August 18, 2022, at 10:00 AM ET. The consensus is for 4.88 million SAAR.