Existing home sales are down, prices are way up
NAR reported that existing home sales fell in June and dropped nearly 19% year-over-year. But median sale prices reached a near-record high.
Key points:
- Sales fell by 3.3% from May, while the median sale price for existing homes jumped to more than $410,000.
- High borrowing costs and low inventory — leading to more competition and rising prices — continue to be a challenge for buyers.
- Market conditions have been favorable to new home builders, who have seen their market caps surge in recent months.
Today, NAR reported that existing home sales fell 3.3% between May and June to a seasonally adjusted annual rate of 4.16 million transactions. Despite the nearly 19% drop in existing homes sales in the last year, median prices were up, reaching $410,200 in June — the second highest monthly median price for existing homes since NAR started tracking this data in 1999.
The highest recorded monthly median price was $413,800 in June 2022.
The latest report and numbers are consistent with trends seen throughout the year: Homeowners aren't ready or willing to part ways with their houses and risk losing their record-low mortgage rate, and the resulting inventory squeeze has stymied buyers and driven up competition — and prices.
"There are simply not enough homes for sale," NAR chief economist Lawrence Yun said in the announcement. "The market can easily absorb a doubling of inventory."
New home builders have been helping to fill the inventory gap, and more homebuyers are opting for newly constructed homes instead of competing for an older one. New home construction is booming in the current environment, and share prices for national homebuilders like Taylor Morrison, Lennar and D.R. Horton — among others — are up significantly in the last six months.
In addition to low inventory, high borrowing costs have been another barrier to homebuyers. While mortgage interest rates fell this week, they have remained in the upper-6% range since early June despite the Fed's pause in interest rate hikes last month. The Fed has signaled that it will hike rates again at some point this year, perhaps as soon as next week.
But some economists have been calling on the Fed to reverse course and cut rates, which could lead to lower borrowing costs. Lower mortgage rates would not only be a boon for buyers, but could entice existing homeowners to finally list their homes for sale, NAR's Yun suggested.
"The first half of the year was a downer for sure with sales lower by 23%," Yun said. "Fewer Americans were on the move despite the usual life-changing circumstances. The pent-up demand will surely be realized soon, especially if mortgage rates and inventory move favorably."
Until then, home prices may only continue to climb in the coming months, Bright MLS chief economist Dr. Lisa Sturtevant said of this morning's news.
"New housing construction will help alleviate some of the supply pressures, but inventory will still be tight and prices will have nowhere to go but up in the second half of 2023."