According to the National Association of Realtors (NAR), existing home sales dropped by 2.7 per cent from May to June, falling short of economists’ expectations of a 4.01 million pace.
This decline continues a housing market slump that began in early 2022 when mortgage rates started climbing from pandemic-era lows.
The national median sales price rose two per cent in June from a year earlier to $435,300, marking the 24th consecutive month of annual price increases.
This record high price comes despite the slowdown in sales activity.
“The second half of the year really depends on what happens with mortgage rates,” Lawrence Yun, NAR’s chief economist, said.
High mortgage rates have significantly impacted affordability for potential buyers.
The average rate on a 30-year mortgage has remained close to 7 per cent this year, adding hundreds of dollars to monthly payments and limiting purchasing power for many Americans.
Yun estimates that a reduction in mortgage rates could substantially boost market activity.
“If the mortgage rate remains stuck at this level, we are essentially looking at very small changes in our home sales and home price condition, but if the mortgage rate was to drop, we know there will be a more meaningful increase in sales,” he said.
First-time homebuyers continue to face significant challenges in entering the market.
They accounted for just 30 per cent of home sales last month, unchanged from May and well below the historical norm of 40 per cent.
The inventory of available homes has improved compared to last year but remains below pre-pandemic levels.
There were 1.53 million unsold homes at the end of June, down 0.6 per cent from May but up nearly 16 per cent from June last year.
This represents a 4.7-month supply at the current sales pace, slightly higher than the 4-month supply recorded in June last year.
Properties are also staying on the market longer, with the typical home remaining listed for 27 days before selling, up from 22 days in June last year.
This extended time on market has led to more price reductions, with 20.7 per cent of homes listed for sale in June having their prices cut – the highest share for the month of June since at least 2016.
Many sellers, rather than lowering prices, are choosing to withdraw their properties from the market altogether.
According to Realtor.com, the number of properties taken off the market without having sold jumped 47 per cent in May compared to the previous year.
“If the mortgage rate was to drop to 6 per cent, that would lead to an additional roughly half-million more homes sold,” Mr Yun said.
