Sellers struggle with denial: if it’s priced “right,” a home will sell, but “right” is where the buyers are, and they’re a lot lower.
By Wolf Richter for WOLF STREET.
Sales of all types of previously owned homes — houses, apartments and cooperatives — fell 5.9% in October from September, the ninth straight month of declines, to a seasonally adjusted annual sales rate of 4.43 million homes, just one her above the lockdown month of April 2020, according to the National Association of Realtors. Compared to the recent free money spike in October 2020, revenue was down 34%.
Year-over-year sales fell 28%, the 15th straight month of year-over-year declines. After April and May 2020, this was the lowest sales since December 2011 (historical data via YCharts):
Sale of single-family homes fell 6.4% from September and 28% year-on-year in October, to a seasonally adjusted annual rate of 3.95 million homes.
Sale of apartments and cooperatives fell 2.0% in October from September, and 30% year-over-year, to 480,000 seasonally adjusted annual figures.
Investors or buyers of a second home bought 16% of homes in October, against 17%-22% in the spring and winter. In other words, their purchases fell at an even higher rate than regular buyers’ purchases, as investors, too, lose interest in buying at these prices.
This decline in sales is a sign that potential sellers and buyers are in a stalemate. Many would-be sellers refuse to accept reality and lower their prices to where the sellers are; instead they think, “and this too shall pass,” and they hope or pray for a Fed pivot or for a miracle or whatever and don’t even put their house on the market, or take it off the market. after not getting any traffic for their ambitious asking price. And buyers have lost interest at current prices.
Homes that are well priced – meaning low priced where the buyers are – are being sold. But sellers don’t like to go there. And we also see that in the active offers. But there is some price reduction going on as more sellers figure this out.
Price reductions: In October, the number of homes with price cuts rose to 327,184 homes, the highest since October 2019, and just slightly below that (data via realtor.com).
But the share of active listings with price cuts has been over 40% over the past five months, by far the highest in the data realtor.com makes available, dating back to 2016:
The average price of all types of homes that closed sales in October fell for the fourth month in a row and is now 8.4% lower than the June peak.
This reduced year-over-year gains further, to 6.6%, down from 8.0% in September, and down from 20% to 25% year-over-year gains during peak madness last year, indicating that seasonality is only responsible for part of the price drop, and the rest of the price drop is some sellers getting more realistic (historical data via YCharts):
Active listings (total inventory for sale minus properties with sales in progress) rose to 754,000 homes in October, up 33% from a year ago, and the highest since August 2020. They remain relatively low, another sign that potential sellers are still always hoping for a Fed pivot or a miracle and don’t put their empty house on the market or take it off the market after a short time (data via realtor.com).
Daily inventory of total inventory increased to 3.3 months of sales, the highest since June 2020.
Sales by region: Sales fell in all regions, but most in the West:
- Northeast: -6.6% mother; -23.0% yoy.
- Midwest: -5.3% mother; -25.5% yoy.
- South: -4.8% mother; -27.2% yoy.
- West: -9.1% mother; -37.5% yoy.
When mortgage rates returned to the normal range of the era before printing money:
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