US Existing-Home Sales Plummet to One of the Slowest Rates Since 2010
US existing-home sales plummeted to one of the slowest rates since 2010 in June, as sellers hold out for lower mortgage rates and buyers hesitate due to persistently high prices. According to data released Tuesday by the National Association of Realtors (NAR), contract closings dropped 5.4% from May. This resulted in a 3.89 million annualized rate. This marked the fourth consecutive decline, with the rate falling short of all estimates in a Bloomberg survey of economists. The slowdown coincided with prices reaching another record in June. The median sales price rose 4.1% to $426,900. Surprisingly, prices are increasing even as more supply has entered the market in recent months. Despite this, inventory remains low by historical standards.
Inventory and Market Dynamics
In June, there were 1.32 million homes for sale, the highest since October 2020 but still significantly below the 1.9 million listed before the pandemic in June 2019. At the current sales rate, it would take 4.1 months to deplete this supply, the longest duration in four years. “Even as the median home price reached a new record high, further large accelerations are unlikely,” stated NAR Chief Economist Lawrence Yun.
Anticipation of Federal Reserve Action
Both buyers and sellers are eagerly awaiting the Federal Reserve to start cutting interest rates. The Fed has maintained interest rates at a two-decade high for the past year. Recent signs of cooling inflation and rising unemployment have increased market expectations that the Fed will cut rates in September and December. This trend has driven mortgage rates lower. The 30-year contract rate dropped to 6.87% in the week ending July 12, down from this year’s peak of 7.29% in April, according to Mortgage Bankers Association figures.
However, this rate is still double its level from the end of 2021. About 65% of homes sold were on the market for less than a month in June, compared with 67% in May, and 29% sold above the list price. Properties remained on the market for an average of 22 days in June, down from 24 days in May, the NAR report indicated.
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Market Shift and Buyer Behavior
Although record-high prices do not suggest a buyer’s market, Yun noted that the market is gradually shifting away from being a seller’s market. Fewer buyers are waiving inspections now compared to a year ago. While houses are taking a little longer to sell, they are still moving relatively quickly. US Existing-home sales, which account for the majority of US total home sales, are recorded when a contract closes. The government will release June new-home sales figures on Wednesday.
Deep Dive into Sales Data
Since 2010, the rate of existing home sales has been lower than June’s level only twice, both at the end of last year. It was the slowest sales figure for any June since 1999. Sales were lower in every price category except for homes listed at $1 million or more, according to Yun. Sale’s declined in all four regions, including the slowest pace for closings in the Midwest since 2011.
Sales of single-family homes were the slowest this year in June. Condominium and co-op sales dropped to the slowest pace since the onset of the pandemic. Individual investors or second-home buyers purchased 16% of homes in June, unchanged from the previous month. First-time buyers accounted for 29% of purchases, down from 31% a month earlier. Sales decreased 13.4% from a year earlier on an unadjusted basis. The US housing market is experiencing a significant slowdown. This is influenced by high prices, limited inventory, and anticipation of interest rate changes by the Federal Reserve. As both buyers and sellers navigate these challenging conditions, the market’s direction remains uncertain.
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