The U.S. housing market is experiencing a slowdown, with existing home sales falling by 5.4% in June to an annual rate of 3.89 million, the lowest since December. This marks the fourth consecutive month of declining sales and a 5.4% drop from the previous year. Despite fewer sales, home prices hit a record high of USD 426,900, up 4.1% year-over-year. Inventory increased to 1.32 million unsold homes, a 23% rise from last year, translating to a 4.1-month supply. High mortgage rates and rising prices continue to impact the market, with first-time buyers and cash transactions playing significant roles.
The U.S. housing market has seen a notable slowdown in recent months, with existing home sales dropping to their lowest level since December. In June, sales of previously occupied homes fell by 5.4% compared to May, reaching an annual rate of 3.89 million, according to the National Association of Realtors (NAR). This marks the fourth consecutive month of declining sales.
The decline in sales reflects a broader trend. Home sales are also down 5.4% compared to June last year, coming in below the 3.99 million annual pace that economists had predicted. Despite this, home prices continue to rise. The national median price for existing homes reached a record high of USD 426,900 in June, marking a 4.1% increase from the previous year. This price increase persists even as the supply of homes on the market grows.
There were approximately 1.32 million unsold homes at the end of June, a 3.1% increase from May and a 23% rise from the previous year. This increase translates to a 4.1-month supply of homes at the current sales pace. Traditionally, a 4-5 month supply is considered balanced between buyers and sellers. While still below pre-pandemic levels, the rising inventory suggests that the market may be shifting toward a buyer's advantage.
Currently, sellers are still benefiting from the tight market. Homes sold last month were typically on the market for just 22 days, up from 18 days a year ago. Additionally, 29% of homes sold for more than their list price, indicating strong competition among buyers. However, the overall housing market has been in a slump since 2022, largely due to rising mortgage rates, which have remained around 7% this year.
The high mortgage rates have led many potential buyers to wait for lower rates before entering the market. The Federal Reserve's decisions on interest rates and inflation are key factors influencing mortgage rates, and any decrease in rates could encourage more activity. Economists expect mortgage rates to remain above 6% for the rest of the year.
First-time homebuyers are particularly affected by these conditions, as they often lack the equity to make a substantial down payment. They represented 29% of home sales last month, a slight increase from the previous year but still below historical averages. Cash buyers and investors continue to play a significant role in the market, with cash transactions making up 28% of sales, up from 26% a year earlier.
As the market adjusts to these conditions, potential buyers and sellers are navigating a landscape of high prices and fluctuating mortgage rates. The shift in inventory levels and ongoing price increases highlight the complexities of the current housing market.
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