The National Association of Realtors reported This Week in Real Estate that existing home sales decreased for the fifth consecutive month in June while the median price climbed to a record high. As inventory is on the rise eighty-eight percent of homes sold in June were on the market for less than a month while the average days on market reached the shortest duration on record, just 14 days, suggesting that homes priced right are still selling very quickly. More inventory moderates a market. The number of single-family homes under construction is 21% higher than a year ago due to the acceleration of permits and starts in the recent past. How long will that continue? Future inventory is less certain given the number of single-family starts and single-family permits decreased to their lowest pace in two years according to the U.S. Department of Housing and Urban Development. Below are a few newsworthy events from the third week of July that influence our business:
Existing-Home Sales Slid 5.4% in June. Existing-home sales dropped for the fifth straight month in June, according to the National Association of REALTORS. Total existing-home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, dipped 5.4% from May to a seasonally adjusted annual rate of 5.12 million in June. Year-over-year, sales fell 14.2% (5.97 million in June 2021). “Falling housing affordability continues to take a toll on potential home buyers,” said NAR Chief Economist Lawrence Yun. “Both mortgage rates and home prices have risen too sharply in a short span of time.”Total housing inventory registered at the end of June was 1,260,000 units, an increase of 9.6% from May and a 2.4% rise from the previous year (1.23 million). Unsold inventory sits at a 3.0-month supply at the current sales pace, up from 2.6 months in May and 2.5 months in June 2021. According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage was 5.52% in June, up from 5.23% in May. The average commitment rate across all of 2021 was 2.96%. “If consumer price inflation continues to rise, then mortgage rates will move higher,” Yun said. “Rates will stabilize only when signs of peak inflation appear. If inflation is contained, then mortgage rates may even decline somewhat.”
Single-Family Starts Fall to Two-Year Low on Higher Construction Costs and Interest Rates. For the first time since June 2020, both single-family starts and permits fell below a one million annual pace. Overall housing starts fell 2.0% to a seasonally adjusted annual rate of 1.56 million units in June from an upwardly revised reading the previous month, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The June reading of 1.56 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts decreased 8.1% to a 982,000 seasonally adjusted annual rate. This is the lowest single-family starts pace since June 2020. Single-family permits decreased 8.0% to a 967,000 unit rate in June. This is the lowest pace for single-family permits since June 2020. As an indicator of the economic impact of housing and as a result of accelerating permits and starts in recent quarters, there are now 824,000 single-family homes under construction. This is 21% higher than a year ago. There are currently 856,000 apartments under construction, up 24% from a year ago. Total housing units now under construction (single-family and multifamily combined) is 24% higher than a year ago.
Existing-Home Prices Hit New Record as Sales Slow. Prices for existing homes climbed to a record high in June, continuing at a breakneck pace with double-digit-percentage annual increases. The median price for an existing home rose to $416,000 last month, up 13.4% compared to a year earlier, the National Association of Realtors reported Wednesday. A separate report released recently by NAR showed that housing affordability has dropped as mortgage payments have spiked 51% in one year. Still, not all buyers are backing away. More homes are coming on the market, and buyers who can afford the higher prices have more choices and are snatching them up quickly. Existing homes sold at a record-setting pace in June, NAR’s data shows. “Finally, there are more homes on the market,” Yun says. “Interestingly, though, the record-low pace of days on market implies a fuzzier picture on home prices. Homes priced right are selling very quickly, but homes priced too high are deterring prospective buyers.” Housing inventories: total housing inventory at the end of the month was 1.26 million units, up 9.6% month over month and 2.4% year over year. Unsold inventory was at a three-month supply compared to 2.5 months in June 2021. Days on the market: eighty-eight percent of homes sold were on the market for less than a month. Properties typically remained on the market for 14 days, which marks the shortest duration on record, according to NAR. That’s down from 16 days in May and 17 days in June 2021. First-time home buyers: this cohort comprised 30% of sales, down from 31% a year ago.All-cash sales: all-cash sales accounted for 25% of existing-home sales transactions, up from 23% in June 2021. Individual investors and second-home buyers, who comprise the largest share of cash sales, made up 16% of overall sales, up from 14% a year earlier. Distressed sales: Foreclosures and short sales continued to make up a very small percentage of home sales—less than 1%, unchanged from June 2021.
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