Home sales have been falling through for many sellers since the beginning of the summer, according to one analyst, as many homebuyers are retreating from the housing market.
As a senior equity analyst at Wells Fargo Securities, Deepa Raghavan told Yahoo Finance Live that their metrics started going down from June, so many builders will tell you they have seen an inflection in the housing market. We will tell you that the metrics took a turn for the worse in July and August. It feels like cancellation rates have gone up tremendously when talking to people on the field. More and more homebuyers have become hesitant about buying a new home, due to the Federal Reserve hiking interest rates up another 75 basis points and the fear of a recession on the horizon.
The new listings of homes for sale fell by 15% in the four weeks ending Aug. 21, the biggest decline since the start of the epidemic, according to Redfin. That has pushed supply for homes down, as for-sale homes dropped to 0.6% from the previous four-week period.
Sellers are attempting to boost sales by luring hesitant homebuyers with mortgage rate buydowns, free amenities, and price reductions.
Raghavan said that the builders have just started to get on the price competition bandwagon. Incentives or discounting have increased tremendously. In some communities, builders are incentivizing or discounting 15% of list prices. It could be as high as 25% in some communities, although it's still at the margins.
A survey and index from the National Association of Home Builders NAHB Home builder confidence fell three points to its lowest level since May 2014, as almost 1 in 4 home builders reported reducing their price this month, up from 19% in August.
In August, the median home sales price for an existing house went up 7.7% year over year to $389,500, although it was down from the record high of $413,800 in June.
All four NAHB regions posted a drop in builder confidence. The index fell 7 points, as the West saw a 10 point drop, and the South saw a 10 point decline. The Northeast and Midwest saw a 5 point drop.
Raghavan isn't optimistic that things will improve for homebuyers in the near future, due to expectations of more interest rate hikes from the Federal Reserve.
Raghavan said that the buyers were hurt. The mortgage rates are trending higher. There is a lot more pressure coming in from the Fed - some of it is priced in. I don't know how we're going to see any respite between now and Super Bowl.