As reported by the National Association of Realtors, sales of previously owned homes took a hit in June, dropping by 5.4% compared to May, with 3.89 million units sold on a seasonally adjusted, annualized basis. This also represents a 5.4% decline from sales in June of the previous year. The decrease in sales indicates a significant slowdown, marking the lowest sales pace since December of the previous year. The decline in sales is attributed to a shift in the market from a seller’s market to a buyer’s market, according to Lawrence Yun, chief economist for the Realtors. Homes are remaining on the market longer, receiving fewer offers, as more buyers demand home inspections and appraisals. Additionally, there has been a definitive increase in inventory on a national level.
At the end of June, inventory levels surged by 23.4% compared to the previous year, amounting to 1.32 million units. Despite this increase, the supply of homes on the market remains at a low 4.1-month supply, well below the balanced threshold of a six-month supply for both buyers and sellers. This rise in inventory levels is a result of homes spending more time on the market. In June, the average time a home spent on the market increased to 22 days, up from 18 days the previous year. Even with this influx of new supply, home prices continue to climb, reaching a median price of $426,900 for existing homes sold in June, a 4.1% increase from the previous year and an all-time high for the second consecutive month.
The increase in median home prices is somewhat skewed due to the strength of the higher-end market segment. Sales of homes priced at over $1 million were the only category showing gains over the previous year, while the largest drop in sales was seen in the $250,000 and lower price range. Despite an increase in supply, the lower end of the market continues to exhibit weakness. However, there has been a recent surge in supply on the lower end. Interestingly, while national sales prices remain high, new listing prices are lower. This is particularly evident in the $200k to $350k price bucket, which saw a 50% increase in listings compared to the previous year.
Effects on Buyer Behavior and Investor Activity
Buyers at the higher end of the market tend to use more cash for purchases, with 28% of sales in June being all cash, up from 26% the previous year. Conversely, investor activity has slightly decreased, accounting for 16% of sales compared to 18% the previous year. Chief economist for Realtor.com, Danielle Hale, suggests that assuming the trend of increasing inventory continues, two things could happen: either home sales will rise, or prices will stabilize. Yun adds that if prices do not rise along with increasing inventory, they may begin to decrease.
The real estate market for previously owned homes experienced a notable decline in sales in June, indicating a transition towards a buyer’s market. The increase in inventory levels, longer time on the market, and rising prices suggest a shifting landscape that may impact both buyers and sellers in the coming months. As market dynamics continue to evolve, it will be essential for all stakeholders to adapt to the changing conditions to navigate successfully in the real estate sector.