US June Home Sales Fell by 5.4% Compared to Previous Month

The U.S. housing market is facing significant challenges amid a looming buyer’s market. Recent data from the National Association of Realtors reveals a troubling trend: sales of previously owned homes dropped by 5.4% in June compared to May, reaching 3.89 million units on a seasonally adjusted annualized basis. This marks the slowest home sales pace since December. The numbers reflect closed sales based on contracts signed mostly in April and May. During this period, the average rate on a 30-year fixed mortgage surged above 7%. Although rates have slightly pulled back to the high 6% range, the impact remains present.

Lawrence Yun, the chief economist for the Realtors, highlighted a shift from a seller's market to a buyer's market. Homes are staying on the market longer, sellers are receiving fewer offers, and buyers are insisting on more home inspections and appraisals. This indicates a significant rise in inventory on a national level.

More Houses, Less Home Sales

In fact, inventory jumped by 23.4% from a year ago, reaching 1.32 million units at the end of June. Although this comes off record lows, it's still only a 4.1-month supply. A balanced market typically requires a six-month supply. This increase in inventory, the highest since May 2020, is driven by homes sitting on the market longer. The average time a home remained on the market rose to 22 days, up from 18 days a year ago.

Despite the rise in inventory, prices have not eased. The median price of an existing home sold in June was $426,900, an increase of 4.1% year over year. This marks an all-time high for the second straight month. The higher end of the market remains strong, skewing overall price data.

Sales of homes priced over $1 million were the only category showing gains compared to last year. In contrast, the biggest drop in sales was seen in homes priced at $250,000 or lower. Supply at the lower end is weakest, though it is experiencing a new surge. While the national sales price remains high, new listing prices are lower. Danielle Hale, chief economist for Realtor.com, noted, “The median listing price is being held down by an influx in smaller and lower-priced listings. The number of for-sale homes in the $200k to $350k price range surged by 50% compared to a year ago.”

When it Comes to Selling High-End Homes, Cash is King

Higher-end buyers tend to use more cash, with 28% of sales being all cash, up from 26% a year ago. However, investor participation has decreased slightly, making up 16% of sales, down from 18% one year ago. Yun added, “Assuming more inventory continues to increase, two things could happen. Either home sales rise, or, if the prices do not rise, the prices would buckle down.”

This evolving market presents significant challenges. The rise in mortgage rates and increased inventory levels are pivotal factors. However, the high prices, especially at the lower end, make it tough for many Americans to afford homes. Conservative businessmen are particularly concerned about how these trends might impact the broader economy and the housing market's stability. As the housing market adjusts, the focus remains on finding a balance that supports both buyers and sellers. The coming months will be crucial in determining the long-term trends in this critical sector.

Do you prefer a buyer’s market or a seller’s market when it comes to home sales? Share your thoughts on the current US housing market.