The real estate market has experienced a significant slowdown, with sales of previously owned homes dropping by 5.4% in June compared to May. This decline is evident in the 3.89 million units sold on a seasonally adjusted, annualized basis, according to the National Association of Realtors. Additionally, sales were also 5.4% lower than June of the previous year, marking the slowest sales pace since December. These figures reflect closed sales, based on contracts signed mostly in April and May, when the average rate on the 30-year fixed mortgage spiked above 7%.
Lawrence Yun, chief economist for the Realtors, notes a shift from a seller’s market to a buyer’s market. This transition is characterized by homes spending longer periods on the market and sellers receiving fewer offers. Moreover, more buyers are insisting on home inspections and appraisals, reflecting a growing cautiousness in the market. The increase in inventory on a national basis further confirms this shift, with a 23.4% jump from the previous year to 1.32 million units by the end of June. Nevertheless, this inventory level, although off record lows, still signifies a mere 4.1-month supply, falling short of the 6-month threshold considered balanced between buyer and seller.
Despite the surge in inventory, prices remain stubbornly high, with the median price of an existing home sold in June reaching $426,900. This figure represents a 4.1% year-over-year increase and an all-time high for the second consecutive month. The discrepancy in price growth is evident across different market segments, with sales of homes priced over $1 million seeing gains while the $250,000 and lower price range experiencing the most significant drop in sales. The supply of homes for sale is particularly weak at the lower end of the market; however, a new surge in inventory is now observed in this segment. It is notable that while the national sales price remains high, new listing prices are actually lower due to an increase in smaller and lower-priced listings.
Buyer Behavior
The data also shed light on changes in buyer behavior, with higher-end buyers tending to use more cash for their purchases. Cash transactions constituted 28% of sales, up from 26% the previous year, indicating a preference for cash transactions among affluent buyers. In contrast, investors pulled back slightly, accounting for 16% of sales compared to 18% one year ago. Realtor.com’s chief economist, Danielle Hale, points out that assuming the continued increase in inventory, two scenarios may unfold. Either home sales will rise, or if prices fail to appreciate, a price correction could occur, leading to a potential downturn in prices.
The real estate market is experiencing notable changes, with a clear shift toward a buyer’s market. Despite an increase in inventory levels, prices remain elevated, reflecting disparities across different price segments. As buyer behavior adapts to market conditions, the future trajectory of the real estate market remains uncertain, hinging on factors such as inventory levels, buyer preferences, and overall economic conditions.