A sign is displayed in front of a home for sale on July 14, 2022 in San Francisco, California.
Justin Sullivan | Getty Images
According to a monthly report from the National Association of Realtors, sales of previously owned homes in June fell 5.4% from May as prices set records and rates jumped.
The number of sales fell at a seasonally adjusted annual rate of 5.12 million units last month, the group said. Sales decreased by 14.2% compared to June 2021.
This is the slowest sales pace since the same month in 2020, when sales fell very briefly at the start of the Covid pandemic. Other than that, it’s the slowest pace since January 2019, and lower than the yearly total for 2019, before the pandemic.
These numbers are based on home closings, so contracts were likely signed in April and May, before the average 30-year fixed mortgage rate topped 6% and inflation hit rates not seen since the early 1980s.
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“This is clearly due to plummeting affordability,” said Lawrence Yun, chief economist for real estate agents. “We’ve never seen mortgage rates climb so quickly to this extent. Even people who want to buy, they’re overpriced.”
There were 1.26 million homes for sale at the end of June. This was a 2.4% increase from the previous June and the first year-over-year gain in three years. At the current rate of sales, inventory now stands at a three-month supply. It is still considered weak, but improving. Supply is increasing both because more sellers are trying to take advantage of perhaps the latest housing boom caused by the pandemic, and because homes are now on the market longer.
Still tight supply, however, is keeping the heat below home prices. The median price of an existing home sold in June set another record at $416,000, a 13.4% year-over-year increase.
Activity continues to be stronger at the high end of the market, where supply is greater. Sales of homes priced between $100,000 and $250,000, for example, have declined 31% annually, while sales of homes priced between $750,000 and $1 million have increased by 6%. Sales of homes priced over $1 million rose 2%. The upper end appears to be weakening as yearly comparisons over the past few months were much higher.
While sales are falling, the market is still incredibly fast. The average time a home spent on the market was 14 days, a record.
“It’s a head-scratching number, given the slowdown in sales,” Yun said. “People are trying to take advantage of their interest rate lock-in. That may explain why the days in the market are so fast.”
Sales will likely fall more sharply in the coming months as more recent indicators point to much weaker buyer demand. Mortgage applications fell to their lowest level in 22 years last week, with demand from homebuyers down 19% from the same week a year ago, according to the Mortgage Bankers Association.
“Based on trends at this point in the real estate and economic cycle, I expect affordability to be the bigger driver than availability going forward,” said Danielle Hale, chief economist at Realtor. com. “We’re already seeing the affordable Northeast and Midwest areas lead Realtor.com’s hottest real estate markets in June, as homebuyers continue to take advantage of workplace flexibility to look for ways to reduce their housing costs.”