In June, existing home sales in the U.S. continued to decline due to a shortage in housing supply, leaving potential buyers with limited options. According to the National Association of Realtors (NAR), sales of previously owned homes dropped 3.3% from the previous month, reaching an annual rate of 4.16 million units. Compared to June 2022, existing home sales have fallen by 18.9%.
Lawrence Yun, the chief economist at NAR, emphasized the lack of available homes, stating that the market could easily absorb a doubling of inventory. At the end of June, there were approximately 1.08 million homes for sale, unchanged from the previous month and down 13.6% from a year ago. This limited inventory has led to increased consumer demand, with homes selling on average in just 18 days last month, the same as in May. However, this is longer than the 14 days recorded in June 2022 but still significantly shorter than pre-pandemic times when homes typically sat on the market for about a month before being sold.
The current pace of sales indicates that it would take around 3.1 months to deplete the existing inventory of homes. Experts consider a pace of six to seven months as a healthy level. Affordability constraints and the locking in of low mortgage rates have deterred existing homeowners from listing their homes, resulting in a significant decrease in new listings compared to pre-pandemic levels. Nicole Bachaud, a senior economist at Zillow, attributes the decline in sales to these factors.
The median price of an existing home sold in June was approximately $410,200, the second-highest price ever recorded since 1999 when the NAR began tracking the data. This represents a minimal decrease of 0.9% from the all-time high of $413,800 recorded one year ago. While housing costs have risen in the Northeast and Midwest, they have declined in the South and the West.
The Federal Reserve's aggressive interest-rate hike campaign has caused mortgage rates to rise above 7% for the first time in almost two decades, cooling the previously hot housing market. However, despite the slow retreat of rates, home prices are once again increasing as buyers adapt to the new rates and compete for the limited supply. Currently, rates on the popular 30-year fixed mortgage hover around 6.78%, significantly higher than the 5.54% rate recorded a year ago and the pre-pandemic average of 3.9%.
The lack of available homes for sale is primarily responsible for the current state of the market. Sellers who secured low mortgage rates before the pandemic have been hesitant to sell, leaving few options for eager buyers. According to Realtor.com, the number of available homes on the market in June was more than 47% lower than the usual amount before the COVID-19 pandemic began in early 2020.