LOS ANGELES – The nation's housing slump deepened in June as sales of previously occupied homes slowed to their slowest pace since December, hampered by elevated mortgage rates and record-high prices.
Sales of previously occupied U.S. homes fell 5.4% last month from May to a seasonally adjusted annual rate of 3.89 million, the fourth consecutive month of declines, the National Association of Realtors said Tuesday.
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Existing home sales were also down 5.4% compared with June of last year. The latest sales came in below the 3.99 million annual pace economists were expecting, according to FactSet.
Despite the pullback in sales, home prices climbed compared with a year earlier for the 12th month in a row. The national median sales price rose 4.1% from a year earlier to $426,900, an all-time high with records going back to 1999.
Home prices rose even as sales slowed and the supply of properties on the market climbed to its highest level since May 2020.
“Right now we’re seeing increased inventory, but we’re not seeing increased sales yet,” said Lawrence Yun, the NAR’s chief economist.
All told, there were about 1.32 million unsold homes at the end of last month, an increase of 3.1% from May and up 23% from June last year, NAR said.
That translates to a 4.1-month supply at the current sales pace. Traditionally, a 4- to 5-month supply is considered a balanced market between buyers and sellers.
While still below pre-pandemic levels, the recent increase in homes for sale suggests that, despite record-high home prices, the housing market may be tipping in favor of homebuyers.
“The latest data is implying that maybe we’re seeing a slow shift away from what had been a sellers’ market and slowly moving into a buyers’ market,” Yun said.
For now, sellers are still benefiting from a tight housing market inventory.
Homebuyers snapped up homes last month typically within just 22 days after the properties hit the market. That's up from 18 days in June last year. And 29% of those properties sold for more than their original list price, which typically means sellers received offers from multiple home shoppers.
The U.S. housing market has been mired in a slump dating back to 2022, when mortgage rates began to climb from pandemic-era lows. Existing home sales sank to a nearly 30-year low last year as the average rate on a 30-year mortgage surged to a 23-year high of 7.79%, according to mortgage buyer Freddie Mac.
The average rate has mostly hovered around 7% this year — more than double what it was just three years ago —- as stronger-than-expected reports on the economy and inflation have forced the Federal Reserve to keep its short-term rate at the highest level in more than 20 years.
One reason home sales have kept declining this year even as the inventory of properties on the market has increased is that many Americans may be holding out for mortgage rates to come down.
Mortgage rates are influenced by several factors, including how the bond market reacts to the central bank’s interest rate policy decisions. That can move the trajectory of the 10-year Treasury yield, which lenders use as a guide to pricing home loans.
Recent signs of cooling inflation have raised expectations that the Federal Reserve will cut its benchmark rate in September. If bond yields decline in anticipation of a Fed rate cut, that could lead mortgage rates to ease.
Most economists expect the average rate on a 30-year home loan to remain above 6% this year.
“Maybe people are waiting for interest rates to be lower before getting back into the market,” Yun said.
Lower mortgage rates could also help spur more homeowners to sell. Many who bought or refinanced a home more than three years ago are reluctant to sell now because they don’t want to give up their fixed-rate mortgages below 3% or 4% — a trend real estate experts refer to as the “lock-in” effect.
First-time homebuyers who don’t have any home equity to put toward their down payment continue to have a tough time getting into the housing market. They accounted for 29% of all homes sold last month, which is down from 31% in May, but up from 27% in June last year. They’ve accounted for 40% of sales historically.
Homebuyers who can afford to sidestep mortgage rates and pay all cash for a home accounted for 28% of sales last month, up from 26% in June last year. And about 16% of homes sold last month were bought by individual investors or homeowners looking to buy a second home, down from 18% a year earlier, NAR said.