Sales of previously owned homes in the U.S. have dropped to the lowest levels since last September, as the national average price for houses hit unprecedented levels.
Home prices increased on an annual basis for the 24th consecutive month, with the national median sales price rising two percent in June from a year earlier to $435,300 – an all-time high.
Existing home sales fell by 2.7 percent from May to June, according to the National Association of Realtors, and the latest home sales fell short of the 4.01 million pace economists were expecting, according to FactSet.
The U.S. housing market has been in a slump since early 2022, when mortgage rates began to climb from pandemic-era lows.
Home sales fell last year to their lowest level in nearly 30 years, leading to a lackluster spring homebuying season – traditionally the busiest period of the year for the housing market.
Stubbornly high mortgage rates and rising prices have intensified the hardships for would-be homebuyers who had already been pummeled by a real estate market that overheated during the pandemic. While the number of homes on the market has increased sharply from a year ago, it remains well below normal levels, meaning prices continue to rise even as sales slow.
“The second half of the year really depends on what happens with mortgage rates,” Lawrence Yun, NAR’s chief economist, told The Associated Press.
High mortgage rates can add hundreds of dollars a month in costs for borrowers, limiting their purchasing power. So far this year, the average rate on a 30-year mortgage has remained relatively close to 7 percent, according to mortgage buyer Freddie Mac.
Homes purchased last month likely went under contract in May and June, when the average rate on a 30-year mortgage ranged from 6.76 percent to 6.89 percent.
Yun estimates that if the average rate on a 30-year mortgage were to fall to 6 percent that would lead to an additional roughly half-million more homes sold.
“If the mortgage rate remains stuck at this level, we are essentially looking at very small changes in our home sales and home price condition, but if the mortgage rate was to drop, we know there will be a more meaningful increase in sales,” he said.
The housing market’s affordability crunch is keeping many aspiring first-time homebuyers on the sidelines. They accounted for 30 percent of homes sales last month, unchanged from May, NAR said. Historically, they made up 40 percent of home sales.
Home shoppers who can afford to buy at current mortgage rates or pay in cash are benefiting from more properties on the market.
There were 1.53 million unsold homes at the end of last month, down 0.6 percent from May, but up nearly 16 percent from June last year, NAR said. That’s still well below the roughly 2 million homes for sale that was typical before the pandemic, however.
June’s month-end inventory translates to a 4.7-month supply at the current sales pace, up from a 4.6-month pace at the end of May and 4 months in June last year. Traditionally, a 5- to 6-month supply is considered a balanced market between buyers and sellers.
Homes for sale are staying on the market longer as sales remain in the doldrums. Properties typically remained on the market for 27 days last month before selling, up from 22 days in June last year, NAR said.
The housing market slowdown isn’t all bad, if you’re a home shopper who can afford to buy. In June, some 20.7 percent of homes listed for sale had their price reduced, the highest share for the month of June going back to at least 2016, according to Realtor.com.
Increasingly, however, many sellers are opting to pull their home off the market rather than lower prices. The number of properties taken off the market without having sold jumped 47 percent in May from a year earlier, according to Realtor.com.
