After an upbeat June when Delaware home sales marked their second straight month of gains, sales in July dipped almost 20%.
Sales totaled 1,048 in July, down 19.5% from 1,302 in June. Compared with last year, sales fell 26.3% from 1,422 in July 2022.
“The decline in sales is due to a lack of inventory combined with the seasonality of the real estate market,” said Chrissy Steele, president of the Delaware Association of Realtors.
Sales in July 2022 were also lower than in June.
While interest rates are rising, Steele said the Delaware real estate market is driven by a multitude of factors, not just interest rates.
“Most home buyers now are prioritizing their quality of life over the monthly payment. They know interest rates fluctuate and they plan to refinance when rates drop again,” she said. “In fact, many lenders know this and are waiving their fees on a future refinance, which fosters confidence in home buyers.”
Delaware’s figures were worse than the national numbers.
Across the U.S., sales in July shrank 2.2% to an annual rate of 4.07 million, compared with 4.16 million in June. Year over year, sales slumped 16.6% from 4.88 million in July 2022, said Lawrence Yun, chief economist at the National Association of Realtors.
“Two factors are driving current sales activity – inventory availability and mortgage rates,” Yun said. “Unfortunately, both have been unfavorable to buyers.”
How are higher interest rates impacting home sales?
Sales are usually closed with mortgage rates locked in one to two months earlier. The average rate on a 30-year, fixed-rate mortgage in May ranged from 6.45% to 7.14%, according to Mortgage News Daily. In June, the rate range was 6.85% to 7.04%.
Compare that with April, when rates were a more favorable 6.14% to 6.75%, or one year ago on June 30, 2022, when the average rate was 5.70%.
An increase in the interest rate from 6% to 7% will add an estimated $177 to a monthly mortgage payment, according to experian.com for a 30-year, fixed-rate mortgage on a $300,000 home with a 10% down payment.
Mortgages are affected by the Federal Reserve, which has been raising interest rates in an effort to lower inflation. After the fed funds rate was near zero during the pandemic, the Federal Reserve has increased rates 11 times since March 2022.
The latest quarter-point hike on July 26 brought the fed funds rate to a range of 5.25% to 5.5%. That’s what banks charge each other for overnight lending, and it affects rates on mortgages, credit cards and loans.
Yun said if mortgage rates retreated, that would bring more buyers and sellers to the market.
What is the median home price in Delaware
The good news in July was for sellers in Delaware, who saw a rise in prices for their homes. The median sales price in July was $378,333, up 1.48% from June and higher by 5.51% from $358,566 in July 2022.
“Delaware continues to outpace the country in year-over-year sales prices,” Steele said. “We are an affordable place to live, and Delaware homes hold their value. Delaware continues to be a good investment for home buyers.”
More:See inside some of Dover’s most luxurious homes for sale including one over $1 million
Nationally, the median price in July dipped, but by less than 1%, to $406,700, compared with $410,200 in June. Since July 2022, the median price climbed 1.9% from $399,000.
Are there a lot of houses to buy in Delaware?
The inventory of homes for sale in Delaware dropped less than 1% in July to 2,689 compared with 2,711 in June. But year over year, inventory was down 4.1% from 2,804 in July 2022.
“Delaware, like the rest of the country is experiencing very low inventory,” Steele said. “Despite rising interest rates, there are simply not enough homes on the market to meet the buyer demand.”
New listings in July dipped 11.3% to 1,339 compared with 1,509 in June and were off by 24.5% from 1,773 in July 2022.
“There are many homeowners seeking to move up, move down, or ‘right-size,’ but they’re hesitant to put that sign in the yard because they see the low inventory and are concerned about finding a replacement property,” Steele said. “This creates a type of clog in the flow of real property transfers. If their home doesn’t enter the marketplace, the next buyer can’t buy, and so forth.”
Nationally, inventory at the end of July was 1.11 million units, up 3.7% from 1.08 million units in June but down 14.6% from 1.3 million a year ago.
Steele said Realtors can help home buyers navigate the conditions of the market, even low inventory.
“Every day, I see sales agreements with creative solutions such as leaseback options, must-buy contingencies and even bridge loans,” she said.
Reporter Ben Mace covers real estate and development news. Reach him at rmace@gannett.com.
