The median home price was $416,000 last month, up 13.4% from a year ago, according to a report from the National Association of Realtors. It represents more than a decade of monthly price gains year on year.
Existing home sales — which include single-family homes, townhouses, condominiums, and co-ops — fell 5.4% in June from May and 14.2% from a year ago. June saw the weakest sales number since June 2020, which was artificially low due to the pandemic.
“Low housing affordability continues to hurt potential homebuyers,” said Lawrence Yun, chief economist at NAR. “Mortgage rates and home prices have risen very sharply in a short period of time.”
The stock, which was tight, saw its first annual turnaround in three years. The number of homes available for sale at the end of June was up 9.6% from May and 2.4% from a year ago.
“Finally, there are more homes on the market,” Yun said. “Properly priced homes sell very quickly, but overpriced homes deter potential buyers.”
Journey to Affordability
Even as sales fell, home prices continued to rise, especially in some popular Sun Belt cities.
Miami recorded the largest average price growth, up 40.1% from last year. It was followed by Orlando, up 30.6%, and Nashville, up 30.6%, according to a NAR report.
But some of the same cities that saw massive price growth during the pandemic were also the places that saw the biggest increase in the number of homes as prices fell in June. Austin led the way, followed by Phoenix and Las Vegas.
While an increase in inventory should reduce pressure on prices, mortgage rates are rising, reducing the purchasing power of buyers. Danielle Hill, chief economist at Realtor.com, said it remains to be seen which factor will have a greater impact on home sales.
“I expect affordability will be the biggest driver of availability going forward,” Hill said. She said affordable areas in the Northeast and Midwest are already some of the hottest housing markets, according to Realtor.com.
“Home shoppers continue to take advantage of workplace flexibility to look for ways to lower housing costs – and enact their own personal anti-inflation plans.”
NAR data supports this trend, with May-June home sales stagnating in the Northeast and declining only 1.6% in the Midwest compared to declines of 6.2% in the South and 11.1% in the West.
“As mortgage rates and prices for other goods and services continue to rise, home shoppers are likely to become more budget conscious,” Hill said. “This is especially true if concerns about the strength of the labor market – which has so far been resilient – grow.”
Inventory is growing, but the market is still fast
Although home sales have slowed to the pace of 2019, the number of days a property is on the market before entering into a contract is the fastest on record, in 14 days. A year ago it was 17 days and the most typical market was seeing real estate on the market for nearly 30 days.
“When homes are listed, they attract buyers,” Yoon said, adding that the fast market is mind-blowing.
One possible driver of the record low number of days in the market is that buyers are trying to take advantage of the pegged interest rate.
“Mortgage rates are going up,” he said. “Buyers may be trying to take advantage of the lower insurance rate. That period is coming to an end quickly. They want to sign the contract and close the deal quickly.”
Yoon said sellers should note that this rapid time in the market is unlikely to last. “This may be the last time we see such speed in the market.”
“I don’t expect any oversupply to happen, even as sales are declining,” Yoon said.
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