June Home Sales Drop Amid Record High Prices
Existing Home Sales Decline Sharply in June Amidst Stubbornly High Mortgage Rates
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Existing home sales experienced a significant downturn in June, falling 2.7% from May to a seasonally adjusted, annualized rate of 3.93 million units. This decline was steeper than the 0.7% drop anticipated by analysts, according to the National Association of Realtors (NAR). Sales remained stagnant compared to June of the previous year, indicating a persistent slowdown in the housing market.
The report, which tracks closings, reflects contract signings from April and May. During this period, the average rate for a 30-year fixed mortgage frequently surpassed 7% and consistently stayed above 6.8%, as reported by Mortgage News Daily.
“High mortgage rates are causing home sales to remain stuck at cyclical lows,” stated Lawrence Yun, chief economist for the NAR. “If the average mortgage rates were to decline to 6%, our scenario analysis suggests an additional 160,000 renters becoming first-time homeowners and elevated sales activity from existing homeowners.”
Mortgage rates have shown little movement in recent months, remaining elevated due to ongoing concerns about the broader economic landscape. The current average rate stands at 6.77%.
Supply Gains, But Market Remains Lean
Despite the sales dip, housing supply continues to improve. At the end of June, 1.53 million units were available for sale, marking a 15.9% increase year over year. This translates to a 4.7-month supply at the current sales pace.A balanced market is typically considered to have a six-month supply, suggesting the market is still lean.
Median Home Price Hits Record High for June
The median price of a home sold in June reached a new record for the month, settling at $435,300. This represents a 2% increase year over year and marks the 24th consecutive month of annual price gains.
“Multiple years of undersupply are driving the record high home price. Home construction continues to lag population growth. this is holding back first-time home buyers from entering the market,” Yun explained. He also noted that the average homeowner’s wealth has grown by $140,900 over the past five years.
Performance Varies by Price Segment
Sales activity shows a divergence across different price points. Homes priced below $100,000 saw a 5% annual decline in sales. Conversely, homes in the $100,000 to $250,000 range experienced a 5% increase, while sales of homes priced above $1 million surged by 14%.
Homes are also spending more time on the market, with the average duration increasing to 27 days from 22 days in June of the previous year. Higher-end homes are currently selling at a faster pace than those priced below $500,000.
First-Time Buyers and Cash Sales
First-time homebuyers accounted for 30% of all sales, a notable decrease from the historical average of 40%. The share of all-cash deals remained elevated at 29% of sales, significantly higher than the roughly 20% recorded before the COVID-19 pandemic.
The number of offers received per listed home averaged 2.4, a slight decrease from 2.5 last month and 2.9 a year ago.
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