Justin Sullivan | Getty Images Pre-owned home sales in June fell 5.4 percent from May, according to a monthly report from the National Association of Realtors, as prices hit a record and interest rates rose. The sales figure fell to a seasonally adjusted annual rate of 5.12 million units last month, the group said. Sales were 14.2% lower compared to June 2021. This is the slowest pace of sales since the same month in 2020, when sales fell very quickly at the start of the pandemic. In addition, it is the slowest pace since January 2019 and below the annual total of 2019, before the pandemic. Those numbers are based on home closings, so contracts were likely signed in April and May, before the average 30-year fixed mortgage rate jumped above 6 percent and as inflation rose to rates not seen since the beginning of the 1980s.
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“It’s clearly due to the plunge in affordability,” said Lawrence Yun, chief economist for Realtors. “We’ve never seen mortgage rates rise this quickly at this rate. Even for those who want to buy, they’re burdened.” There were 1.26 million homes for sale at the end of June. This is a 2.4% increase from the previous June and is the first annual increase in three years. At the current rate of sales, inventory is now in a three-month supply. This is still considered low, but is improving. Supply is increasing both because more sellers are trying to take advantage of the last of perhaps the hot, pandemic-induced housing boom and because homes are now remaining on the market. Still limited supply, however, is keeping the heat under house prices. The median price of an existing home sold in June set another record at $416,000, up 13.4% year over year. Activity continues to be strongest at the higher end of the market, where there is more supply. Sales of homes priced between $100,000 and $250,000, for example, were down 31% year over year, while sales of homes priced between $750,000 and $1 million rose 6%. Sales of homes priced over $1 million rose 2%. The top end appears to be weakening, as year-to-date comparisons in recent months have been much higher. While sales are down, buying is still incredibly brisk. The average time a home spent on the market was 14 days, an all-time low. “That’s an impressive number given the slower sales,” Yun said. “People are trying to take advantage of their rate lock. That may explain why market days are so fast.” Sales are likely to fall more sharply in the coming months as the latest indicators point to much lower demand from buyers. Mortgage applications fell to a 22-year low last week, with demand from home buyers down 19% from the same week a year ago, according to the Mortgage Bankers Association. “Based on trends at this stage in the housing and business cycle, I expect affordability to be the biggest driver of availability going forward,” said Danielle Hale, chief economist at Realtor.com. “Already, we’re seeing affordable areas in the Northeast and Midwest top Realtor.com’s hottest housing markets in June as homebuyers continue to take advantage of workplace flexibility while looking for ways to lower housing costs.”
