Home Sales Decline as Prices and Rates Remain High
In June, U.S. existing home sales unexpectedly dropped as home prices hit record highs and mortgage rates stayed elevated, keeping many potential buyers hesitant.
According to the National Association of Realtors, sales fell by 2.4% last month, bringing the seasonally adjusted annual rate to 4.09 million units. Interestingly, a Reuters survey had anticipated a rise to around 4.2 million units.
While sales increased in the Northeast, there were declines in the Midwest, South, and West.
It’s important to note that existing home sales are counted at closing, meaning last month’s figures likely reflected contracts initiated in April and May. Although mortgage rates have decreased following their spike after recent conflicts in the Middle East, the average rate for a typical 30-year fixed mortgage still sits roughly 45 basis points higher than before, as per Freddie Mac data.
Interestingly, home sales in June were up by 2.8% compared to the same month last year.
“The ups and downs of monthly home sales activity due to slight fluctuations in mortgage rates illustrate how much homebuyers are affected by changing affordability,” remarked NAR Chief Economist Lawrence Yun.
Rising mortgage rates seem to be making potential sellers more reluctant to list their homes. Many homeowners have secured fixed-rate mortgages at less than 5%. Currently, the inventory of available homes has slightly declined by 0.6%, totaling 1.56 million units, though it has increased by 1.3% from the previous year.
There’s a notable national shortage of housing, particularly for entry-level buyers, with the National Association of Home Builders estimating a shortfall of around 1.2 million units.
At the current sales rate, the existing home inventory would last about 4.6 months, which is unchanged from a year ago. The demand for housing continues to drive prices upward, reflecting this ongoing shortage.
Recently, Congress passed a bipartisan housing affordability bill that aims to limit single-family home purchases by investment firms and expedite environmental reviews for building projects.
However, President Trump has indicated he won’t sign the bill until another ballot measure is enacted.
Last month, the median price of existing homes rose by 1.8% from a year prior, reaching a record high of $440,600.
Interestingly, first-time homebuyers constituted 33% of sales, up from 30% a year ago, yet experts suggest a robust market ideally requires a 40% share from this group.
The median duration that properties remained on the market increased to 28 days, just slightly up from 27 days last year. On a more positive note, the proportion of bad sales, including foreclosures, decreased to 2% from 3% the previous year.
