Sales of pre-owned homes dropped 3.3% in June compared with May, running at a seasonally adjusted annualized rate of 4.16 million units, according to the National Association of Realtors.
Compared with June of last year, sales were 18.9% lower. That is the slowest sales pace for June since 2009.
The continued weakness in the housing market is not for lack of demand. It’s all about a critical shortage of supply. There were just 1.08 million homes for sale at the end of June, 13.6% less than June of 2022. At the current sales pace, that represents a 3.1-month supply. A six-month supply is considered balanced between buyer and seller.
“There are simply not enough homes for sale,” said Lawrence Yun, chief economist for the Realtors. “The market can easily absorb a doubling of inventory.”
That dynamic is keeping pressure under home prices. The median price of an existing home sold in June was $410,200, the second highest price ever recorded by the Realtors. Last June’s price was the highest, but by barely 1%. This median measure, however, also reflects what’s selling, and right now, with mortgage rates much higher than last year, the low end of the market is most active.
“Home sales fell, but home prices have held firm in most parts of the country,” Yun said. “Limited supply is still leading to multiple-offer situations, with one-third of homes getting sold above the list price in the latest month.”
Sales are unlikely to recover any time soon, as mortgage rates weigh heavy on affordability. The Realtors measure June sales based on closings, so contracts that were Likely signed in April and May. Mortgage rates hung in the mid 6% range during that time and then shot up over 7% at the very end of May. Rates stayed in the 7% range for all of June, as home prices rose.
First-time buyers are struggling the most. Their share of June sales fell to 26%, down from 30% in June 2022. That is the lowest share since the Realtors began tracking this metric.
The higher end of the market, however, appears to be recovering. While sales were down across all price points, they were down least at the higher end. That was not the case last year, when higher-priced home sales were dropping off sharply.
As the competition heats up, buyers are increasingly using cash to win over sellers. All-cash sales made up 26% of June transactions, slightly higher than both May and June of last year.
Sales are unlikely to rebound soon in the existing home market, but sales of newly built homes are reaping the benefits. The nation’s largest homebuilder, DR Horton, reported a big jump in new orders jumping in its latest earnings release Thursday.
“Despite continued higher mortgage rates and inflationary pressures, our net sales orders increased 37% from the prior year quarter, as the supply of both new and existing homes at affordable price points remains limited and demographics supporting housing demand remain favorable,” said Donald Horton, chairman of the board in a release.