2023-07-21 12:27:41
Existing home sales fell 3.3% in June compared with May, to a seasonally adjusted annualized rate of 4.16 million units, according to the National Association of Realtors (NAR).
The weakness in the US housing market is not due to a lack of demand. This is a critical supply shortage, experts point out. “The market can easily absorb a doubling of inventory,” adds the chief economist. At the end of June, there were 1.08 million homes for sale, 13.6% less than in June 2022. “At the current rate of sales, that represents an offer of 3.1 months. A six-month supply is considered balanced between the buyer and the seller,” says Yun.
Sales drop, but prices are close to maximums due to the lack of supply
That dynamic keeps pressure on home prices.. The median price of a home sold in June was of 410,200 dollars (about 367,000 euros), the second highest price ever recorded by real estate agents, only surpassed by June 2022, but just 1%. This measure also reflects what is selling, and right now, with mortgage rates much higher than last year, the lower end of the market is the most active.
“Home sales fell, but home prices have held firm across most of the country,” Yun said. “Limited supply is still leading to multiple offer situations, with a third of homes selling for above asking price in the last month.”
Sales are unlikely to pick up anytime soon as mortgage interest rates will continue to weigh on affordability. Realtors measure June sales based on closings, so contracts that were likely signed in April and May. Rates hovered in the mid-6% range during that time and then spiked over 7% at the end of May. In June they remained in the 7% range.
Demand for new construction grows while purchases with mortgages fall
The share of first-time buyers in June sales fell to 26% of the totalbelow the 30% of June 2022. That is the lowest turnout since Realtors started tracking this metric.
However, the upper end of the market seems to be recovering faster than the rest. As competition increases, buyers are increasingly using cash to win over sellers. Cash sales represented 26% of June transactionsa little more than in May and June last year.
This situation is also benefiting the construction of new construction. DR Horton, the largest homebuilder in the US, reported a big jump in new orders in its latest earnings release.
“Despite the current economic situation, our net sales orders increased 37% over the same quarter last year, as the supply of affordable new and existing homes remains limited and the demographics supporting housing demand remain favorable,” said his president, Donald Horton.
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