High mortgage rates combined with elevated home prices are prompting a slowdown in the housing market. According to the National Association of Realtors, sales of previously owned homes in June fell by 2.4% from May, totaling 4.09 million units on a seasonally adjusted annualized basis. While this marks a month-over-month decline, June sales were 2.8% higher than in the same month last year.
Lawrence Yun, the chief economist for the Realtors, noted that the fluctuations in monthly home sales reflect buyers’ sensitivity to changing affordability conditions amid rising mortgage rates. Despite this decline, recent job gains—over 500,000 since the start of the year—are expected to continue supporting the housing market. The sales figures represent contracts that likely originated in May, during a period of increasing mortgage rates.
By the end of June, inventory stood at 1.56 million units, a 0.6% decrease from May but up 1.3% from June 2022. At the current sales rate, this represents a 4.6-month supply, which indicates a lean market as a balanced market typically features a six-month supply. Consequently, home prices have continued to rise, with the median price of existing homes sold in June reaching $440,600—an increase of 1.8% from the previous year and the highest on record.
Yun emphasized that without consistent growth in inventory, long-term housing affordability may be compromised, leading to further acceleration in home prices. He advocates for increased supply to enhance opportunities for potential homeowners. Sales activity remains strongest in the higher end of the market, with homes priced above $750,000 showing significant sales increases compared to lower-priced segments.
Why this story matters: The evolving housing market dynamics impact affordability and buyer sentiment amid economic fluctuations.
Key takeaway: Elevated mortgage rates and home prices are leading to decreased sales, yet job growth may provide some stability to the market.
Opposing viewpoint: While affordability pressures exist, some analysts argue the luxury segment remains robust, suggesting a bifurcation in market health.
