Existing-home sales in the U.S. plunged by 5.4 percent from May to June marking the fifth consecutive month that sales have declined, according to the latest data from the National Association of Realtors (NAR).
In May, the sales of existing single-family homes had declined by 3.4 percent after the median existing-home sales price exceeded $400,000 for the first time. Compared to figures from May 2021, sales of existing homes dropped 14.2 percent.
Now, new data shows a further drop in sales, the equivalent to a seasonally adjusted annual rate of 5.12 million total existing-home sales —including single-family homes, townhomes, condominiums and co-ops— in June.
The median existing-home price has also continued increasing, going up to $416,000 —13.4 percent higher than in June 2021, when the average price was $366,000. It’s the 124th consecutive month of year-on-year increases —a grim record for the U.S.
Despite the drop in sales, properties remained on the market for less time in June than they did in May, only 14 days compared to 16 days in May —the lowest amount of time since NAR began tracking those figures in May 2011.
The NAR also reported that existing homes “priced right” are selling “very quickly,” while overpriced ones tend to remain in the market for longer.
“As monetary tightening and inflation chip away at homebuyers’ confidence and buying power, home sales numbers have decreased significantly,” Adam Benjamin Shaw, deputy director of the London School of Economics’ Global Economic Governance Commission, told Newsweek.
It’s a major shift from the time of the pandemic when “low-interest rates in 2020 and 2021 brought US home sales to levels not seen since before the subprime mortgage crisis,” Shaw said.
The new home sector is also experiencing a similar trend of slower sales.
In May, new home sales increased by less than experts expected after a major slump in April, with sales of new single-family houses only 10.7 percent above the revised total of 629,000 the month before, when new home sales had plunged to their lowest since April 2020. But in May, home sales were still 5.9 percent lower year-on-year.
Uncertainty about inflation and increased interest and mortgage rates have played into slowing down home sales in the first half of the year, according to Shaw.
A similar slowdown of the housing market is what many experts are expecting, and a much better alternative to a much-feared housing crash.
As high mortgage rates, inflation, soaring home prices and a limited inventory combine into making purchasing a home unaffordable for many, “U.S. home sales will remain well below their recent January 2021 peak,” Shaw predicts.
Mortgage rates are at their highest levels since 2008, with the average 30-year rate rising from 3.1 percent to 5.87 percent this week. The median sales price of existing homes was $407,600 in May 2022, while that of new homes was $449,000.
“American homebuyers might wait out this period of high inflation and rising interest rates, preferring to purchase when market conditions are more stable,” Shaw said. “They will be more likely to purchase homes once inflation has subsided.”