Home prices hit record high, though sales continue to slow

Home prices hit a new all-time high in June, even as home sales fell for the fifth consecutive month as lack of affordability continued to push buyers out of the market.

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 marks over a decade of year-over-year monthly price gains.

Sales of existing homes — which include single-family homes, townhouses, condominiums and co-ops — were down 5.4% in June from May and 14.2% from a year ago . June saw the lowest sales figure since June 2020, which was artificially low due to the pandemic.

“The decline in housing affordability continues to weigh on potential buyers,” said Lawrence Yun, chief economist at NAR. “Mortgage rates and house prices have risen too steeply in a short time.”

Inventories, which had been tight, saw their first year-on-year rally 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 houses on the market,” Yun said. “Homes that are priced right sell very quickly, but homes that are overpriced deter potential buyers.”

Even as sales declined, home prices continued to climb, especially in some popular Sun Belt towns.

Miami saw the strongest growth in median prices, up 40.1% from a year ago. It was followed by Orlando, up 30.6%, and Nashville, up 30.6%, according to the 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 with price reductions in June. Austin led the way, followed by Phoenix and Las Vegas.

While rising inventories should reduce price pressure, mortgage rates are rising, reducing buyers’ purchasing power. It remains to be seen which factor will have a bigger impact on home sales, said Danielle Hale, chief economist for Realtor.com.

“I expect affordability to be the bigger driver than availability going forward,” Hale said. Already, she says, the more affordable areas of the Northeast and Midwest are among the hottest housing markets, according to Realtor.com.

“Homebuyers continue to take advantage of workplace flexibility to look for ways to lower their housing costs – by adopting their own personal inflation-fighting plans.”

Data from the NAR confirms this trend, with home sales flat from May to June in the Northeast and slipping 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 climb, homebuyers are likely to become even more budget-conscious,” Hale said. “This is especially true if concerns about the strength of the labor market – which has so far remained resilient – increase.”

Even though home sales have slowed to the pace of 2019, the number of days a property is on the market before closing a deal is the fastest on record, at 14 days. A year ago it was 17 days and a more typical market would see properties on the market for almost 30 days.

“Whenever houses are listed, they attract buyers,” said Yun, who added that the fast market is scratching their heads.

One possible driver of the record days on market is buyers trying to take advantage of their locked-in interest rate.

“Mortgage rates tend to go up,” he said. “Maybe the buyers are trying to take advantage of a lower lock-in rate. This period is coming to an end quickly. They want to sign the contract and close the deal quickly.

But sellers should take note that this rapid period in the market is unlikely to last, Yun said. “This might be the last time we see such speed in the market.”

As inventory rises, there are still long-standing housing shortages, Yun said. As builders reduce single-family construction and boost the construction of multi-family buildings, they may be betting that more people will have the price of buying and renting taken away.

“I don’t expect any oversupply to come, even if sales pull back,” Yun said.

Leave a Comment