In June, sales of previously owned homes dropped 5.4% compared to May, totaling 3.89 million units on a seasonally adjusted, annualized basis. This is also a 5.4% decline from June of the previous year, marking the slowest sales pace since December. These closed sales were primarily based on contracts signed in April and May when the 30-year fixed mortgage rate rose above 7%. While rates have slightly decreased since then, falling to the high 6% range, the market has shifted from a seller’s market to a buyer’s market. Lawrence Yun, the chief economist for the Realtors, noted that homes are staying on the market longer, receiving fewer offers, and buyers are increasingly demanding home inspections and appraisals. Additionally, inventory has risen on a national level, increasing by 23.4% from the previous year to 1.32 million units by the end of June. However, this only represents a 4.1-month supply, well below the balanced 6-month supply mark.
Despite the increase in inventory, home prices continue to rise. The median price of an existing home sold in June was $426,900, up 4.1% from the previous year and reaching an all-time high for the second consecutive month. This is partly influenced by the strength of the higher-end market segment, with sales of homes priced over $1 million seeing gains while the biggest drop in sales occurred in the $250,000 and lower range. Although supply is weakest on the lower end of the market, a surge in new listings in this price range is now being observed. Danielle Hale, chief economist for Realtor.com, pointed out that the median listing price is being tempered by an increase in smaller and lower-priced listings, with the number of homes in the $200,000 to $350,000 range rising by 50% compared to the previous year. Higher-end buyers are more likely to use cash for their purchases, with cash sales accounting for 28% of transactions, up from 26% the previous year. Investors have slightly decreased their activity, representing 16% of sales compared to 18% a year ago.
Looking ahead, Yun suggested that if inventory continues to grow, one of two outcomes is likely to occur. Either home sales will rise, or if prices do not increase, they may start to decline. The trajectory of the market will depend on whether this increased inventory can meet the demand from potential buyers. With the market shifting towards a buyer’s market and more inventory becoming available, it remains to be seen how this will impact home sales and prices in the coming months.
