The housing industry is one of the most sensitive markets to Federal Reserve policy changes, especially the interest rate. For the first time since the start of the pandemic, home sales slipped, year-over-year in consecutive months. Home sales were down 14% in August from a year ago as sales topped out at 1,419 in 2022 compared to 1,646 in August 2021.
Single-family home sales declined 13% with 1,333 sales in August compared to 1,534 sales last year. Townhouses/condos dropped 23% with 86 sales compared to 112 in 2021. Townhouses/condos made up over 6% of the total market in August.
“Sales throughout the region started to cool in June when the mortgage rates spiked to almost 6%,” said Rusty Underwood, president of Bluegrass Realtors®. “After two unprecedented years in real estate where prices and appreciation exploded, some buyers hit pause in their home search as a result of increasing rates, inflation and decreased purchasing power.”
Despite the slowdown in transactions, median prices still rose in August. Prices jumped to a new all-time monthly high reaching $249,900, up 11% over last year when the median was $225,000, and coming in at the third highest month ever behind June and July of this year. Single-family home prices increased 8% to $250,000 while townhouse/condo prices jumped 17%, reaching $210,000.
August’s total volume dropped to just over $410 million in residential real estate sold, a 3% decline over last year’s total of $424 million, still the second highest August on record.
Housing inventory appears to be gradually making a comeback, reaching the highest level since December 2019. August saw the number of homes on the market jump to 3,159, a 10% increase over last year’s 2,862. Month-over-month, available homes increased 2%.
Months of inventory has steadily risen since early spring and hit a substantial jump this summer due to the slow-down in sales. In August, months of inventory hit 2.3 months, a 15% uptick from last year when it stood at 2.
“With moderate monthly sales and a rise in the existing months of inventory, buyers have gained a little breathing room for the first time in a couple of years,” said Underwood. “But demand continues to be very strong and the number of new listings still isn’t keeping pace with what would get us back to a more balanced market.”
Properties remained on the market for 25 days in August, up from 17 days in 2021 and 17 days in July, a 47% increase in both.
The market normally sees listings taper off after peaking in the late summer and this year was no different. New real estate listings in Central and Southern Kentucky dropped 7% compared to a year ago, with 1,765 residential properties versus 1,907 last year, and down 3% from July.
“We are faced with yet another interest rate hike from the federal government as they continue efforts to curb inflation,” stated Underwood. “The rapid escalation of interest rates could continue to affect buyer's perception of the industry and may keep the market tempered going into the last quarter of the year.”
As a result of the escalation of mortgage rates throughout the year, pending sales have been affected the past several months, with a slowing of 12% in August, with 1,444 homes under contract, compared to 1,636 last year.
With the softening of sales and under contract homes falling in August, days on market took a turn. The average days on market (DOM) rose 47%, from 17 days in 2021 to 25 days this year. The median DOM, although rising 100% year-over-year, went from only 4 days last year to 8 days in August 2022, showing homes are still selling relatively fast.
“The market is adjusting back to a more normal pace, one that would more accurately compare to what we experienced in 2019,” continued Underwood. “Showings, however, are still tracking at or above last year, proving there is still heavy buyer interest in our region, despite an uptick in the interest rate. By historical measure, a 5-6% interest rate is still historically low comparatively. Unprecedented times brought buyers the 3% range and that likely won’t return any time in the near future, but the increase in rates has not affected the health of property values in our markets."
As the region’s leading advocate for homeownership, Bluegrass Realtors® understands the value and joy of owning a home. The Association represents more than 4,000 Realtors® located in 30 counties: Anderson, Bath, Bell, Bourbon, Clark, Clay, Elliott, Estill, Fayette, Franklin, Harrison, Jackson, Jessamine, Knox, Laurel, Lee, Madison, McCreary, Menifee, Montgomery, Nicholas, Owsley, Powell, Pulaski, Rowan, Russell, Scott, Wayne, Whitley and Woodford counties. Visit www.bluegrassrealtors.com for up to the minute real estate listings and buying and selling resources.