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Existing Home Sales Chart Longest Streak of Declines Ever

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The US economy runs on money printing and artificially low interest rates. Nowhere is that more obvious than in the housing market.

With aggressive rate hikes in its war against price inflation, the Federal Reserve pricked the housing bubble and air continues to seep out. Existing home sales fall for the 11th straight month in December — the longest streak of declines in history.

Existing home sales were down 1.5% month-on-month, according to data released by the National Association of Realtors (NAR). On an annual basis, home sales plunged by 34%. It was the biggest calendar year drop on record. That means existing home sales fell faster last year than they did in 2007, 2008, or 2009 during the housing crisis and Great Recession. And they dropped more than they did during the pandemic year in 2020.

The decline in existing home sales in December happened despite mortgage rates falling slightly during the month.

The average 30-year mortgage rate is now around 6.982%. The last time we saw mortgage rates over 6% was right before the housing bubble popped leading to the 2008 financial crisis. Until mid-April 2022, mortgage rates were in the 4% to 5% range.

Actual sales in December (not seasonally adjusted)  fell 36.3% year-over-year, to 326,000 homes. That was down from 513,000 homes a year ago.

“December was another difficult month for buyers, who continue to face limited inventory and high mortgage rates,” NAR’s chief economist Lawrence Yun said in a statement.

The median sale price of homes that closed in November fell for the sixth straight month to $366,900. That represents an 11.3% from the peak median price in June. But even with the decline, prices still remain slightly higher than they were a year ago.

Prices haven’t fallen faster because the housing market remains tight. A lot of people refuse to sell with these falling prices. WolfStreet explains.

Priced right, just about any home will sell, but sellers are not wanting to price their homes right. And potential sellers are sitting on their vacant homes, hoping for a quick end to this downturn, or they’re putting it on the rental market or try to make a go of it as a vacation rental, rather than dealing with the reality of a mind-blowing housing bubble that has loudly popped.”

Even so, home values are being pulled lower. Homes on the market with price reduction hit a new December high according to data by realtor.com going back to 2016. A full quarter of the active listings in December recorded a price reduction.

Investors are pulling out of the market. During the easy-money, low-interest-rate boom created by the Federal Reserve in the wake of the pandemic, investor money poured into the housing market. With mortgage rates now jacked up due to the Fed’s rate hike and home values beginning to decline, investors are starting to run away. All-cash sales plunged by 22% year-over-year in December. Sales to individual investors or second-home buyers plunged by 27%.

In a recent podcast, Peter Schiff warned that the deflating housing bubble is a bad sign for the broader economy. A lot of economic activity reflected in GDP is related to home sales.

So, all those people who are still clinging to the false hope that the economy is going to experience a soft landing are not reading any of the very bold upper-case letters clearly written on this collapsing wall.”

The Fed blew up this housing bubble when it artificially suppressed interest rates and bought billions of dollars in mortgage-backed securities. Low mortgage rates combined with rapidly rising home prices are a recipe for a housing bubble.

But now the central bank has pricked the bubble by pushing interest rates up.

What the Fed giveth, the Fed taketh away.

Mortgage rates began to fall in late 2018 as the economy tanked and the Federal Reserve ended its post-2008 rate hike cycle. Rates continued to fall as the Fed pivoted back to quantitative easing and then dropped through the floor with the rate cuts and QE infinity in response to the coronavirus. In the wake of the pandemic, mortgage rates fell to historically low levels and home prices surged. Sellers were getting multiple offers above the asking price on the first listing day.

The big spike in mortgage rates we’re seeing today started as the Fed began talking up monetary tightening to tackle raging inflation. As WolfStreet put it, the housing bubble has loudly popped.

We expect the housing bubble to continue to deflate as we move into 2023. Just how fast the air comes out and the impact on the broader economy remains to be seen.

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About The Author

Michael Maharrey is the managing editor of the SchiffGold blog, and the host of the Friday Gold Wrap Podcast and It's Your Dime interview series.
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