"The first half of the year was a downer for sure"
Amid a supply shortage and deteriorating affordability, existing-home sales sank 3.3% in June, according to the latest data from the National Association of REALTORS.
Sales of existing homes retreated to an annualized rate of 4.16 million in June, down 3.3% on a month-over-month basis and 18.9% compared to June 2022 figures (5.13 million).
“The first half of the year was a downer for sure with sales lower by 23%,” NAR chief economist Lawrence Yun said in the report. “Fewer Americans were on the move despite the usual life-changing circumstances. The pent-up demand will surely be realized soon, especially if mortgage rates and inventory move favorably.”
The lack of inventory contributed to much of the shrinkage in sales, as there were simply not enough homes for sale.
Total housing inventory remained flat in June at 1.08 million but down 13.6% from last year’s 1.25 million. At the current sales rate, unsold inventory sits at a 3.1-month supply – up from three months in May and 2.9 months in June 2022.
“The low inventory forces home buyers to compete with one another, preventing prices from falling despite affordability difficulties due to high mortgage rates,” NerdWallet mortgage expert Holden Lewis said. “Home shoppers are responding to the shortage of existing homes by looking at new construction.”
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The good news, Yun pointed out, is that “home sales have likely already bottomed, and the pace of sales will begin to settle into a new normal below the breakneck pace of 2020 and 2021, but also not as low as earlier this year. The hope is that affordability will improve in the second half of 2023 so that the pace of sales can be not too hot, not too cold, but just right.”
However, prices are still near record highs, with the median existing home at $410,200 in June. That’s down 0.9% from the all-time high of $413,800 a year ago. The monthly median price surpassed $400,000 for the third time.
“Home sales fell, but home prices have held firm in most parts of the country,” Yun said. “The national median home price in June was slightly less than the record high of nearly $414,000 in June of last year. Limited supply is still leading to multiple-offer situations, with one-third of homes getting sold above the list price in the latest month.”
The rise in mortgage rates has also played a key role in the downturn in existing-home sales. The 30-year fixed mortgage rate has hovered in the 6% to 7% range over the past three months, averaging 6.96% as of July 13, according to Freddie Mac.
“Over the past 50 years, we’ve tracked 12 rising mortgage-rate eras, and existing-home sales declined in only half of them,” said Mark Fleming, chief economist for First American. “The 1977-1981 rising-rate era stands out because mortgage rates increased dramatically from approximately 9% to 18.5%. During this period, the Federal Reserve hiked interest rates to tame out-of-control inflation. The result was a 43% decline in existing-home sales.”
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