A home is on the market in Arlington, Virginia, July 13, 2023.
Saul Loeb | AFP | Getty Images
Sales of pre-owned homes dropped 3.3% in June compared with May, running at a seasonally adjusted annualized rate of 4.16 million units, in line with the National Association of Realtors.
Compared with June of last 12 months, sales were 18.9% lower. That’s the slowest sales pace for June since 2009.
The continued weakness within the housing market will not be for lack of demand. It’s all a few critical shortage of supply. There have been just 1.08 million homes on the market at the tip of June, 13.6% lower than June of 2022. At the present sales pace, that represents a 3.1-month supply. A six-month supply is taken into account balanced between buyer and seller.
“There are simply not enough homes on the market,” said Lawrence Yun, chief economist for the Realtors. “The market can easily absorb a doubling of inventory.”
That dynamic is keeping pressure under home prices. The median price of an existing home sold in June was $410,200, the second-highest price ever recorded by the Realtors. Last June’s price was the very best, but by barely 1%. This median measure, nonetheless, also reflects what’s selling, and right away, with mortgage rates much higher than last 12 months, the low end of the market is most energetic.
“Home sales fell, but home prices have held firm in most parts of the country,” Yun said. “Limited supply remains to be resulting in multiple-offer situations, with one-third of homes getting sold above the list price in the most recent month.”
Sales are unlikely to get better anytime soon, as mortgage rates weigh heavy on affordability. The Realtors measure June sales based on closings, so contracts that were likely signed in April and May. Mortgage rates hung within the mid 6% range during that point after which shot up over 7% on the very end of May. Rates stayed within the 7% range for all of June, as home prices rose.
First-time buyers are struggling probably the most. Their share of June sales fell to 26%, down from 30% in June 2022. That’s the lowest share because the Realtors began tracking this metric.
The upper end of the market, nonetheless, appears to be recovering. While sales were down across all price points, they were down least at the upper end. That was not the case last 12 months, when higher-priced home sales were dropping off sharply.
Because the competition heats up, buyers are increasingly using money to win over sellers. All-cash sales made up 26% of June transactions, barely higher than each May and June of last 12 months.
Sales are unlikely to rebound soon in the prevailing home market, but sales of newly built homes are reaping the advantages. The nation’s largest homebuilder, DR Horton, reported an enormous jump in recent orders jumping in its latest earnings release Thursday.
“Despite continued higher mortgage rates and inflationary pressures, our net sales orders increased 37% from the prior 12 months quarter, as the availability of each recent and existing homes at inexpensive price points stays limited and demographics supporting housing demand remain favorable,” said Donald Horton, chairman of the board, in a release.