Sales of previously occupied U.S. homes slid in June to the slowest pace since last September as mortgage rates remained elevated and the national median sales price rose to an all-time high of $435,300.
Sales of previously occupied U.S. homes slid in June to the slowest pace since last September as mortgage rates remained elevated and national median sales prices hit unprecedented levels.
"The problem with the housing market right now is that mortgage rates remain high. According to Freddie Mac, the average 30-year fixed rate mortgage is 6.75%. Still, high mortgage rates are really hitting the housing market. For the fifth consecutive month, existing home sales were either unchanged or down from a year ago," says CBS News business analyst Jill Schlesinger.
Existing home sales fell 2.7% last month from May to a seasonally adjusted annual rate of 3.93 million units, the National Association of Realtors said Wednesday.
Schlesinger adds that if you're a first-time home buyer, it's an especially difficult situation.
"Mortgage rates remaining high is really harming first-time home buyers," she says. "According to this report, first-time homebuyers represented about 30% of sales. Historically, that number has been about 40% of existing home sales."
Sales were flat compared with June last year. The latest home sales fell short of the 4.01 million pace economists were expecting, according to FactSet.
It is not all about mortgage rates though. The price of homes continues to skyrocket at rates far surpassing anything else.
"Prices remain high. Over the past five years, the median price for an existing home is up by more than 42%. That's about twice the rate of inflation," noted Schlesinger.
Home prices increased on an annual basis for the 24th consecutive month to reach those record heights.
The U.S. housing market has been in a slump since early 2022, when mortgage rates began to climb from pandemic-era lows. Home sales fell last year to their lowest level in nearly 30 years.
Sluggish home sales led to a lackluster spring homebuying season, traditionally the busiest period of the year for the housing market.
Stubbornly high mortgage rates and rising prices have intensified the hardships for would-be homebuyers who had already been pummeled by a real estate market that overheated during the pandemic. And while the number of homes on the market has increased sharply from a year ago, it remains well below normal levels, meaning prices continue to rise even as sales slow.
“The second half of the year really depends on what happens with mortgage rates,” said Lawrence Yun, NAR’s chief economist.
High mortgage rates can add hundreds of dollars a month in costs for borrowers, limiting their purchasing power. So far this year, the average rate on a 30-year mortgage has remained relatively close to 7%, according to mortgage buyer Freddie Mac.
Homes purchased last month likely went under contract in May and June, when the average rate on a 30-year mortgage ranged from 6.76% to 6.89%.
Yun estimates that if the average rate on a 30-year mortgage were to fall to 6% that would lead to an additional roughly half-million more homes sold.
“If the mortgage rate remains stuck at this level, we are essentially looking at very small changes in our home sales and home price condition, but if the mortgage rate was to drop, we know there will be a more meaningful increase in sales,” he said.
Home shoppers who can afford to buy at current mortgage rates or pay in cash are benefiting from more properties on the market.
There were 1.53 million unsold homes at the end of last month, down 0.6% from May, but up nearly 16% from June last year, NAR said. That’s still well below the roughly 2 million homes for sale that was typical before the pandemic, however.
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. Traditionally, a 5- to 6-month supply is considered a balanced market between buyers and sellers.
Homes for sale are staying on the market longer as sales remain in the doldrums. Properties typically remained on the market for 27 days last month before selling, up from 22 days in June last year, NAR said.
The housing market slowdown isn't all bad, if you're a home shopper who can afford to buy. In June, some 20.7% of homes listed for sale had their price reduced, the highest share for the month of June going back to at least 2016, according to Realtor.com.
Increasingly, however, many sellers are opting to pull their home off the market rather than lower prices. The number of properties taken off the market without having sold jumped 47% in May from a year earlier, according to Realtor.com.
The Associated Press contributed to this story.