A sign is hung in front of a home for sale July 14, 2022 in San Francisco, California.
Justin Sullivan | Getty pictures
Sales of previously owned homes in June fell 5.4% from May, according to a monthly report from the National Association of Realtors, when prices set records and prices rose.
Sales fell to a seasonally adjusted annual rate of 5.1[ads1]2 million units last month, the group said. Sales were 14.2% lower compared to June 2021.
This is the lowest sales rate since the same month in 2020, when sales fell very briefly at the start of the pandemic. Outside of that, it is the lowest pace since January 2019, and below the annual total for 2019, pre-pandemic.
These figures are based on housing closures, so the contracts were probably signed in April and May, before the average interest rate on the 30-year fixed mortgage shot above 6% and when inflation rose at rates that have not been seen since the early 1980s.
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“It’s clearly because of the falling plausibility,” said Lawrence Yun, chief economist at Realtors. “We have never seen mortgage rates rise so rapidly in this order of magnitude. Even people who want to buy are priced out.”
There were 1.26 million homes for sale at the end of June. This is an increase of 2.4% from last June, and the first increase from the previous year in three years. With today’s sales pace, the stock is now on a three-month supply. It is still considered low, but improving. The offer is increasing both because more sellers are trying to take advantage of perhaps the latest of the red-hot, pandemic-induced housing boom, and because homes are now on the market longer.
However, the still tight supply keeps heat below house prices. The median price of an existing home sold in June set another record of $ 416,000, an increase of 13.4% year-over-year.
Activity continues to be stronger at the higher end of the market, where there are more offers. Sales of homes priced between $ 100,000 and $ 250,000, for example, were 31% lower annually, while sales of homes priced between $ 750,000 and $ 1 million increased by 6%. Sales of homes priced above $ 1 million increased by 2%. The upper part seems to be weakening, as annual comparisons in recent months were much higher.
While sales are falling, the market is still incredibly fast. The average time a home spent on the market was 14 days, a record low.
“This is a head-scratching number, given slower sales,” Yun said. “People are trying to take advantage of their interest rate lock. That may explain why the days on the market are so fast.”
Sales are likely to fall more sharply in the coming months, as newer indicators point to much weaker demand from buyers. Mortgage applications fell to a 22-year low last week, with demand from home buyers down 19% from the same week a year ago, according to the Mortgage Bankers Association.
“Based on trends at this stage in the housing and business cycle, I expect reasonableness to be the biggest driver rather than availability going forward,” said Danielle Hale, chief economist at Realtor.com. “We are already seeing affordable areas in the Northeast and Midwest topping Realtor.com’s hottest housing markets in June, as homebuyers continue to leverage workplace flexibility as they look for ways to reduce housing costs.”