Sales of Previously Owned Homes Decline Amidst Shifting Market Conditions

WASHINGTON, D.C. — The National Association of Realtors (NAR) has announced a substantial drop in the sales of previously owned homes, with transactions declining by 5.4% in June compared to May. The seasonally adjusted, annualized rate for June stands at 3.89 million units, reflecting the slowest sales pace since December of the preceding year. This figure also denotes a 5.4% decrease from June of the prior year, underscoring a significant deceleration in the housing market.

The data encompasses closed transactions based predominantly on contracts signed in April and May, a period marked by an increase in the average interest rate on the 30-year fixed mortgage, which surpassed 7%. Although mortgage rates have since slightly moderated, settling in the high 6% range, the impact of the previous surge is clearly reflected in the diminished sales activity.

Market Dynamics: A Transition to a Buyer’s Market

Lawrence Yun, Chief Economist for the National Association of Realtors, suggests that current market conditions indicate a shift from a seller’s market to a buyer’s market. “We’re seeing a slow shift from a seller’s market to a buyer’s market,” Yun observed. He noted that homes are staying on the market for extended periods, with sellers receiving fewer offers. Additionally, there has been a discernible rise in buyer demands for home inspections and appraisals. On a national scale, inventory levels have increased, offering buyers more options.

By the end of June, the inventory of homes for sale surged by 23.4% compared to the previous year, reaching 1.32 million units. Despite this increase, which marks a recovery from historically low inventory levels, the current supply represents only a 4.1-month inventory. A balanced market is generally characterized by a 6-month supply, indicating that while inventory levels are improving, they have not yet achieved equilibrium.

This surge in inventory, the highest since May 2020, is attributed to homes remaining on the market for longer durations. The average time a home spent on the market increased to 22 days, up from 18 days a year ago. However, despite this uptick in supply, the additional inventory has not alleviated upward price pressures.

Price Trends and Market Segmentation

In June, the median price of an existing home rose to $426,900, marking a 4.1% increase year-over-year and setting a new record for the second consecutive month. This increase in median prices is partly driven by continued strength in the high-end market segment, where sales of homes priced over $1 million have seen gains compared to the previous year. In contrast, the most substantial decline in sales has been observed in the $250,000 and lower price range.

The inventory of homes remains particularly constrained at the lower end of the market. However, there has been a notable influx of new listings within the $200,000 to $350,000 price range, with the number of such listings increasing by 50% compared to a year ago. This influx of lower-priced listings is contributing to a slight moderation in the median listing price.

Financing and Investment Trends

The current market conditions are marked by a notable increase in cash transactions, with 28% of home sales being all-cash deals, up from 26% a year ago. This rise in cash sales reflects stronger purchasing power among higher-end buyers. Conversely, investor activity has seen a slight decline, with investors accounting for 16% of sales, down from 18% a year ago.

Danielle Hale, Chief Economist for Realtor.com, explained, “The median listing price is being held down by an influx of smaller and lower-priced listings.” She noted that the increase in listings within the $200,000 to $350,000 range has contributed to this trend.

Future Market Outlook

Looking ahead, Yun emphasizes that the future trajectory of the housing market will hinge on the evolving dynamics of inventory levels and pricing. “Assuming more inventory continues to increase, two things would happen,” Yun added. “Either home sales will rise, or if prices do not continue to increase, they might stabilize.” The interplay between rising inventory, shifting buyer demand, and price adjustments will be crucial in shaping the direction of the housing market in the forthcoming months.