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Slump in U.S. home sales in June, with median sales price peaking at an unprecedented $435,300

U.S. home resales declines in June, reaching a sluggish rate not seen since last September, amid persistently high mortgage rates.

House sales in the US slow down in June with the highest-ever median sales price of $435,300...
House sales in the US slow down in June with the highest-ever median sales price of $435,300 recorded nationally

Slump in U.S. home sales in June, with median sales price peaking at an unprecedented $435,300

The U.S. housing market has experienced a slowdown since early 2022, primarily due to several interrelated factors. These include rising mortgage rates, limited inventory, high home prices, and regional disparities in market dynamics.

Starting in early 2022, mortgage rates climbed significantly from pandemic-era lows (around 3% or less) to near 7%, making borrowing more expensive for buyers. This reduction in affordability has weakened demand for home purchases, causing existing home sales to decline by 2.7% in June 2023, reaching a seasonally adjusted annual rate of 3.93 million units. Economists had expected existing home sales to reach a pace of 4.01 million units, but they fell short of this expectation.

Many homeowners who refinanced or bought during the low-rate period now hesitate to sell because they would have to replace their low-rate mortgages with much higher-rate ones. This "rate lock-in" effect has suppressed the supply of existing homes for sale, tightening inventory even further.

High home prices, driven by supply shortages, have further challenged affordability for potential buyers, especially first-time and low- to moderate-income buyers. Historically, first-time homebuyers made up 40% of home sales, but in June 2023, they accounted for only 30% of homes sales, unchanged from May.

Some markets, particularly in regions like the Midwest and South, have seen slight easing in affordability pressures, while others, especially in the Northeast and parts of the Midwest, still face acute supply constraints. Areas with the highest inventory growth, mainly in Florida and Texas, have experienced weaker price performance.

The slowdown in the housing market has led to reduced home sales and slowing, sometimes declining, home price growth. After a period of rapid appreciation, year-over-year home price growth has started to decelerate nationwide. In about 25% of major metropolitan areas, prices have begun to decline year-over-year, up from 5% the previous year. However, prices remain high overall, supported by ongoing supply constraints.

Homebuilders face affordability challenges too, often offering incentives or price cuts to attract buyers, while new construction lags population growth, limiting relief on supply. The number of homes on the market has increased sharply from a year ago, but remains well below normal levels.

The national median sales price for previously occupied homes in June 2023 reached an all-time high of $435,300. Home shoppers who can afford to buy at current mortgage rates or pay in cash are benefiting from more properties on the market. The number of properties taken off the market without having sold jumped 47% in May from a year earlier, according to Realtor.com.

Properties typically remained on the market for 27 days last month before selling, up from 22 days in June last year. There were 1.53 million unsold homes at the end of last month, up nearly 16% from June last year, but still well below the roughly 2 million homes for sale that was typical before the pandemic.

If the average rate on a 30-year mortgage were to fall to 6%, it would lead to an additional roughly half-million more homes sold, according to Yun. June's month-end inventory translates to a 4.7-month supply at the current sales pace, up from a 4.6-month pace at the end of May and 4 months in June last year.

As the housing market continues to navigate these challenges, it remains to be seen how these factors will evolve and impact the market in the coming months.

  1. In Seattle, a technology hub known for companies like Microsoft, the real estate market has been affected by the national housing market slowdown.
  2. The high financing costs of purchasing property are making potential investors think twice about investing in Seattle's real estate market, due to the rising mortgage rates.
  3. The housing-market slowdown and finite supply of homes have driven prices up in Seattle's real estate market, creating an unfavorable environment for first-time buyers and those with lower incomes.
  4. As the housing market navigates these challenges, economic analysts speculate that the finance industry, particularly the housing sector, may see fluctuations in the Seattle area's real estate market over the coming months.

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