The National Association of Realtors reported a 5.4% drop in sales of previously owned homes in June compared to May, with 3.89 million units sold on a seasonally adjusted, annualized basis. This represents a 5.4% decrease from the same period last year, marking the slowest sales pace since December. These closed sales are reflective of contracts signed predominantly in April and May, coinciding with a spike in the average rate on the 30-year fixed mortgage to over 7%. Although rates have slightly receded to the high 6% range, the impact on home sales has been significant.
Chief economist for the Realtors, Lawrence Yun, noted a gradual shift from a seller’s market to a buyer’s market. Homes are spending more time on the market, and sellers are receiving fewer offers. Consequently, more buyers are requesting home inspections and appraisals. Nationally, inventory levels are on the rise, jumping 23.4% from the previous year to 1.32 million units by the end of June. Despite the increase in supply, the inventory remains low at just a 4.1-month supply, far below the balanced level of a 6-month supply.
The surge in inventory levels has not led to a decrease in home prices. The median price of an existing home sold in June reached $426,900, marking a 4.1% year-over-year increase and an all-time high for the second consecutive month. Notably, sales of homes priced over $1 million experienced gains, while the lower price range of $250,000 and below saw the most significant drop in sales. The supply of homes for sale is particularly weak in the lower price range, though there has been a recent surge in listings.
Despite the high national sales price, new listing prices are trending lower due to an influx of smaller and lower-priced listings. The number of homes for sale in the $200k to $350k price range surged by 50% compared to the previous year. Higher-end buyers are more likely to utilize cash for purchases, with 28% of sales being all-cash transactions, up from 26% the previous year. Investors, on the other hand, decreased their presence in the market, comprising 16% of sales compared to 18% the prior year.
Looking ahead, Lawrence Yun speculates on two possible outcomes with the continued increase in inventory. Either home sales will rise, or if prices do not increase, they may start to decline. The evolving dynamics of the real estate market indicate a significant change in the balance of power from sellers to buyers, presenting new opportunities and challenges for both parties involved. As the market continues to adjust, it will be crucial for stakeholders to adapt to the shifting landscape.