U.S. existing home sales fell more than expected in June and the median home price hit a record high again, but improving supply and lower mortgage rates raised hopes that home sales may recover in coming months.
The National Association of Realtors said on Tuesday that home sales fell 5.4 percent at a seasonally adjusted annual rate to 3.89 million last month, the lowest since December. Economists surveyed by Reuters had expected home resales to fall to 4 million.
Home resales, which account for the majority of U.S. home sales, fell 5.4% in June from a year earlier.
The median existing home price rose 4.1% year over year to a record high of $426,900, marking the second consecutive month of record highs. Home prices rose in all four regions.
Home resales are counted when a contract is signed, and June’s sales likely reflect contracts that were signed in the past two months, when the average interest rate on the popular 30-year fixed-rate mortgage was above 7.0 percent.
The average rate on a 30-year fixed-rate mortgage fell to a four-month low of 6.77% last week from 6.89%, matching the average for the same period in 2023, according to data from mortgage lender Freddie Mac. That’s down from a six-month high of 7.22% in early May on expectations that the Federal Reserve would deliver a much-needed rate cut in September.
“We’re seeing a gradual shift from a seller’s market to a buyer’s market,” said Lawrence Yun, chief economist for the National Association of Realtors. “Homes are staying on the market a little longer, and sellers are receiving fewer offers to purchase.”
In the densely populated South, sales plummeted 5.9%. In the Midwest, the least affordable region, sales plummeted 8.0%. In the Northeast, sales fell 2.1% and in the West, sales fell 2.6%.
Inventory Increase
Housing inventory rose 3.1% to 1.32 million units last month. Supply increased 23.4% from a year ago.
A rise in weather-related claims has caused insurance rates to skyrocket across the country, forcing some homeowners to put their properties up for sale.
Still, there remains a shortage of entry-level housing, and not enough new homes are being built. The government reported last week that single-family home construction fell to an eight-month low in June, while future building permits fell to the lowest in a year. Many homeowners have mortgage rates below 5 percent.
Economists estimated that residential investment, which includes home construction and sales, was likely to reduce gross domestic product in the second quarter after growing by more than half a percentage point in the January-March period.
At June’s sales pace, it would take 4.1 months to use up the current inventory of existing homes, the highest level in more than four years and up from 3.1 months a year ago.
A four- to seven-month supply is considered a healthy balance between supply and demand.
“Demand and supply trends are approaching a balanced market state,” Yoon said.
Properties took an average of 22 days to sell in June, compared with 18 days a year ago. First-time buyer sales were 29% compared with 27% a year ago.
That rate remains below the 40% that economists and real estate agents say is needed to jump-start the housing market.
All-cash sales represented 28% of total transactions, up from 26% in 2016. Distressed debt sales, including foreclosures, represented 2.0% of total transactions, unchanged from the prior year.
