In a notable downturn for the housing market, existing-home sales in the US have hit one of their slowest paces since 2010, as sellers hold out for further drops in mortgage rates and buyers hesitate in the face of persistently high prices. According to data released by the National Association of Realtors, contract closings dropped by 5.4% from May to a 3.89 million annualized rate, marking the fourth consecutive decline and falling below all expectations in a Bloomberg survey of economists.
The stagnation in sales coincides with another record increase in prices, with the median sales price climbing by 4.1% to $426,900 in June. This surprising price growth is occurring despite a recent influx of supply onto the market, although inventory levels remain historically low. There were 1.32 million homes for sale in June, the highest since October 2020 but still significantly below pre-pandemic levels of 1.9 million in June 2019. At the current sales rate, it would take 4.1 months to deplete this supply, the lengthiest duration in four years.
NAR Chief Economist Lawrence Yun expressed doubts about the likelihood of further significant price increases, even as median home prices hit a new peak. Both buyers and sellers are eagerly anticipating potential interest rate cuts by the Federal Reserve, especially given recent signs of cooling inflation and rising unemployment. Market expectations are high for rate cuts in both September and December, prompting a decline in mortgage rates from this year's peak of 7.29% in April to 6.87% in the week ending July 12 – still double their levels from the end of 2021.
Notably, in June, 65% of homes sold were on the market for under a month, a slight decrease from May, with 29% selling above the list price. Properties spent an average of 22 days on the market in June, down from 24 days in May, according to the NAR report. Despite the record-high prices indicating a market still favoring sellers, Yun noted a gradual shift away from this trend, with fewer buyers waiving inspections compared to a year ago and houses taking slightly longer to sell.
Existing-home sales play a significant role in the overall US housing market and are recorded when contracts are closed. The upcoming release of June new-home sales figures by the government on Wednesday will provide further insights into the state of the housing market.