Home sales drop to 9-month low as prices hit all-time high

Sales of previously occupied US homes slid in June to the slowest pace since last September as mortgage rates remained elevated and national median sales prices hit unprecedented levels.

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.

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.

Home prices increased on an annual basis for the 24th consecutive month. The national median sales price rose 2% in June from a year earlier to $435,300, an all-time high.

The US 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.

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%.

High mortgage rates can add hundreds of dollars a month in costs for borrowers, limiting their purchasing power. The trend is a key reason for why this year’s spring homebuying season has been a bust.

“The second half of the year really depends on what happens with mortgage rates,” said Lawrence Yun, NAR’s chief economist.

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The affordability constraints are limiting the activity of first-time buyers. They accounted for 30% of home sales last month, unchanged from May. Historically, they made up 40% of home sales.

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.